The Forex Chronicles

Bitcoin Update – Now Over $8000

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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.

Bitcoin Price Chart - 25 July 2018

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.

Bitcoin’s Lack Of Volatility Suggests A Breakout Could Be Imminent

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Bitcoin’s Volatile Past

If you have ever purchased any Bitcoins, you will know that this particular cryptocurrency has been on a crazy ride so far.

Just 3 years ago today you could buy a single Bitcoin for just $222, which seemed really expensive at the time, but today it is worth a staggering $7620.

That’s only half the story as well because at one point Bitcoin experienced a surge in popularity as a result of widespread media exposure, and everyone seemed to be buying Bitcoin and jumping on the bandwagon.

This helped to push the price of Bitcoin to an all-time high of $19,783.06 as demand far outstripped supply, but it has since fallen by more than 60% from its highs.

So while many people will have made some huge life-changing gains, a lot of people who were late to the party are nursing some massive losses.

Lack of Volatility in Summer 2018

In the last month or so, the price of Bitcoin appears to have stabilized between 7000 and 8000, and is a lot less volatile than it used to be. The days of massive price swings appear to be over, at least for now.

This can be seen in the price chart below because you can see that the Bollinger Band indicator, which itself is a good indicator of volatility, is as narrow now as it has ever been, and all of the EMAs (exponential moving averages) that I like to use are all very close together, which also indicates a low volatility sideways trading range.

Bitcoin Price Chart 8 June 2018

Breakout Trading Opportunity?

It is extremely difficult to make money when an instrument is trading in a sideways trading range with no clear direction or momentum, but this is often the calm before the storm.

As soon as the price breaks out of one of these trading ranges with volume and momentum, it is often the start of a large breakout, either to the upside or downside, and therefore there is potentially a lot of money to be made by entering a position in the same direction as this breakout.

Of course there are no guarantees because you do sometimes see some false breakouts, but it will be interesting to watch the price of Bitcoin in the coming weeks.

If the price manages to move strongly upwards or downwards and smash through one of the outer Bollinger Bands, it could signal the start of a new trend, and therefore could represent a decent trading opportunity.

(Please note that this is just my own personal thoughts and ideas, and does not represent professional financial or trading advice in any way. You should always do your own research before trading Bitcoin or any other financial instrument.)

Why The GBP/USD Is At A Critical Point At The Start Of October 2015

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At this time of the year, the summer holidays are well and truly over and we start to see decent volumes in the forex markets, and large price moves in many of the major currency pairs.

So it’s interesting to take a look at the GBP/USD pair because this is at a critical point right now.

If you take a look at the chart below, you will see that this pair has just managed to fall below the horizontal trendline (indicated by the black line), which will often signal the start of a breakout, but has had a mini-rebound since then (and is in fact moving higher and higher as I write this article):

GBPUSD_OCT15

So it is still unclear whether this is a decisive break, in which case we could see this pair fall to around 1.46 – 1.48, or whether it is going to bounce off this level once again and head back into the trading range that has been established over the last 4 or 5 months.

From a trading perspective, this is definitely not a good trading opportunity at the moment because it really is a 50/50 shot, but if we could get a few more days of consolidation where the price hovers around the trendline, followed by a large down day, this would present more of an opportunity.

That’s because you will often see the price move out of a trading range and break through a trendline before retracing slightly. It’s often the second price move that confirms the breakout.

So we will have to wait and see what happens next.