What Has Caused Bitcoin To Surge Higher?
If you have been watching the price of Bitcoin closely over recent months, you will know that it hasn’t really moved a great deal, and has predominantly been trading in a sideways trading pattern for a number of weeks.
However just when it appeared that people were starting to lose interest in Bitcoin and other cryptocurrencies, the price suddenly surged higher, going from just under $5800 to around $8300, suggesting that people are becoming more bullish about the future prospects of Bitcoin once again.
It is not immediately obvious why positive sentiment has returned, but this article from Fxstreet.com, suggests that it could be due to a number of factors, such as Google and Facebook easing the pressure on cryptocurrencies, calls for easier regulation, interest from institutions and a move towards a Bitcoin ETF.
How Could You Have Profited From This Price Swing?
From a trading point of view, not many people would have predicted that we would see such a strong move above $8000 in such a short space of time, but there were definitely opportunities to make money from this latest breakout.
That’s because as I pointed out in a recent blog post that discussed Bitcoin’s lack of volatility, it was trading in a sideways trading range for a long time. So you just needed to be patient and wait for the price to break upwards or downwards with momentum.
Indeed there were actually two opportunities to make money because the price broke downwards just days after my last post, falling 10% in one weekend. Therefore if you had entered a short position after this strong price move, or entered a short position after waiting for a small rebound, you could have made up to 1000 times your stake because the price of Bitcoin subsequently fell another $1000 in the following days and weeks.
With this latest move, the Bollinger Bands were very close together once again, as indeed were the EMAs that I like to use, which indicated a sideways trading range and hinted that a possible breakout was imminent in the future, and this subsequently occurred on 17 July when the price broke strongly out of this narrow range to close at $7315. This would have been a good point to enter a long position because the price has already moved around $1000 higher.
Closing Comments
Of course it is easy to be wise after the event, and it would be very easy to sit here and claim that I profited from both of these breakouts, but that wasn’t the case at all because I have never traded Bitcoin or any other cryptocurrencies.
Nevertheless, I have profited from similar breakouts on other markets, and just wanted to point out that these breakouts seem to be just as profitable on Bitcoin as they are on all these other markets.
In fact they are probably even more profitable because when the price of Bitcoin starts to rise or fall, it seems to gather momentum really quickly and will often move at least $1000 each time, and sometimes a lot more.
So it may be worth keeping an eye out for these profitable breakout opportunities in the future because when the price starts to trade in a very narrow trading range with tightly packed Bollinger Bands and exponential moving averages, it is often followed by a significant breakout either upwards or downwards.
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