Although Bitcoin managed to have an impressive performance in 2017, this year had been disappointing for cryptocurrency enthusiasts, with prices slumping aggressively and leaving people on the negative. Bitcoin trading activity had been intense right when the market had topped, but since then an interesting phenomenon happened.
The new crypto safe haven
As we can see from the chart below, Bitcoin volatility had been steadily dropping throughout the year 2018, reaching a point of strong compression at the present time. We’ll leave this aspect for the second part of this material. With all the other cryptocurrencies losing more than 80% of value, Bitcoin had managed to held decently around the 6,000 key support area and had been also favored by the market drop, since its dominance had increased while the other rivals had been going down.
Although Bitcoin trading activity had been steadily going down, institutional players, in particular, had found it as a safe place for their funds. Due to its longest lifespan, Bitcoin is still the most important cryptocurrency and the most stable in terms of price variations.
Price action explained
In the chart above, we have highlighted a few waves which had a common characteristic. If we go from right to the left, we see that each bullish wave had been weaker than the previous one. What is this aspect suggesting? It could suggest that bulls are weaker, sellers are stronger, or most likely both.
With this weakening bullish interest, volatility had been on a downward path, but we are now at a potential turning point.
If we analyze the Bitcoin performance in the last quarter of the year for the past five years, we will see that four out of the last five years had been positive for Bitcoin, with the price surging on the upside. Only one had been bearish, which means that there is currently an 80% probability that the price could have a positive performance until the end of 2018.
Price action and seasonality in contradiction
We have two contradictory aspects, first is the price action and second the Bitcoin seasonality. So the question that arises is where it could head? We can’t know for sure, but we know that we have two key levels: 6,000 as support and 6,800 as resistance, so the first one which will be broken will potentially point out where the price is likely headed.
Trading on cryptocurrencies carries risks. The value of the investments can both increase and decrease and the investors may lose all their investment capital. Past performance may not be indicative of future results.