Market coverage for bitcoin foreign exchange market since 2011
Since the last update on February 13 there are not many fresh developments. The monthly KAMA average is plane, which permits us to calculate fairly reliable levels of support and resistance. Spil you can see nothing interesting happened with the BTCUSD cross that remains inwards the supports and resistance levels (yellow lines).
I have added a fresh indicator that calculates supports and resistances using spil a commencing point the close of the previous month (with the idea to forecast next month support/resistance levels), te this case the close of February at about $ 10300. I have used the last 50 months, just overheen Four years from the bear market’s lowest point te 2015, to calculate volatility.
The druppel wij have seen te latest days has reached an intermediate level, -1.Five standard deviations, so I can say that there has not bot a level of extreme volatility but not even normal.
My opinion is that the bitcoin will proceed to remain for most of the year within the levels calculated with the KAMA (yellow) and therefore remains a good chance to buy the price area from 4000 to 5500 dollars, while it is to be evaluated a reduction of any bullish position should the BTCUSD go above 25 thousand dollars.
I also give you some brief term indications for the next days, the very first resistance is $9500, you might see a Top not exceeding $9500 before the BTCUSD resumes its descent. A pauze above $10000 would mean that at least te the brief term the bearish trend is overheen.
On Legal January 2018, I wrote that the bottom wasgoed most likely done but I hinted that at the pauze of the same I would have closed my long term position, unluckily there wasgoed a subsequent very strong selling activity after a feeble reaction from the support of the weekly chart (at about 9500$). Ter thesis cases it is useful to scale the time framework to the next one (from weekly to monthly), so i applied the KAMA average and its deviation lines to the monthly graph instead of applying them to the weekly graph.
The resulting graph is this at the uur and the market has reacted strongly from this support area.
You can see that the very first deviation line has hold the price from further lows at the end of the 2014-2015 bearish market, the same negative deviation line reported to date is at about $ 5300 and the market, for now, has done a bottom at $ 5900. I’ts difficult for mij to say if the bearish market commenced te December 2018 is overheen, I remain persuaded that wij will hardly see stable prices under $3900 and that the support area from $3900 to $5300 will be very strong for this year.
If during ther year the trend of the Kama average becomes bearish from plane wij will have a confirmation that a down trend, even on the monthly chart, has bot established and this would undermine a little the validity of the support area indicated te the chart.
For now I think that the market is still stronger than the 2014-2015 period and that any medium-term correction should be above the indicated support area.
This is the main template I use with the tradingview verhoging, it is a weekly XBTUSD chart with the Kaufmann moving average I modified by adding the deviation lines.
Thesis deviation lines have bot appropriately calibrated according to the volatility of the underlying asset.
Spil you can clearly see, the market has never tested the 2nd negative deviation line and has always reacted from the very first line.
So it wasgoed also yesterday after a ondergrens at 9200$ where a strong reaction took place up to 11600$.
I think that this market is headed well above 20000$ te the upcoming weeks/months, for completeness a possible bearish screenplay would imply very first a druppel down to 7500$, a subsequent reaction to 9500$-10000$ before resuming the fall to fresh lows. This possible bearish screenplay would coax mij to liquidate all the bitcoins i bought te 2014-2015. Spil long XBTUSD stays above 9500$ i’m not worried for my long term position.
Every beginning of a fresh year i postbode an outlook using entropic methods explained te the technical section of this blog. Here you can find the 2015, 2016 and 2018 forecast update, where you can find more information about this treatment.
Updated values for bitcoin (te brackets values of last year) using daily gegevens since August 2010 (average of Four exchanges when possible).
Bitcoin’s entropic values versus the Usd strongly improved ter 2018 but volatility enhanced a bit, despite this the Growth Factor (G) enlargened up to 1.0028% (reminisce that volatility is detrimental to the Growth Factor) compounded daily or 280% yearly up from 30% of 1y ago. Also the optimal fraction of your capital to invest te bitcoin improved te 2018 with a 7.7% instead of 6.4% of 1y ago.
*38700 is obtained with today price (around 13800$) times (1.0028^365)=
13800*Two.77=38740, just switch 365 with the number of days you choose for a different forecast.
It’s interesting to notice that with diminished volatility the support level is above the actual quote of XBTUSD (13800$ at the uur i’m writing) because the growth factor (G) is very high and is skewing everything to the upside. If volatility stays low the uptrend should thrust bitcoin above 22k USD during the year without too much effort, it’s a script i choose instead of wild price swings.
What went wrong te 2018?
A year ago, I forecasted a top of $2900, reached te July 2018 with an intermediate Top well ahead of the end of the year. I attempted to dual the volatility factor (rms) to see the next level after a reader asked mij about the possibility that bitcoin wasgoed ter a bubble above 2900$. The next level wasgoed around 6000$, again this fresh level has bot violated at the end of October.
The last Two months have bot crazy and the explanation is a large switch te shift ter this market happened te March 2018 (with altcoins literally exploding) that basically erased the reliability of the January 2018 forecast. I think that this year forecast should be more accurate compared to last year.
For this year i think that i’ll consider the support/resistance levels obtained with a utter volatility value with the result to have for the entire 2018 a good probability to stay inwards the 12300$-121000$ price zone.
At the same time i think that at the end of a strong buying orgasm period, if any, it will be wise to reduce your bitcoin investment if the price goes above 60k-70k USD.
I’m at your disposition for any questions, see you at the next update and Glad Fresh Year!
XBT/USD weekly price range 14300$-17500$ | This week wij comeback to a lower volatility level for calculating VWAP volume deviation lines, so wij have a third and fourth deviation line not spil far speciaal spil they were ter previous updates. The trend remains steadily UP also because the ondergrens done at 11000 dollars is clearly higher than that of 12 November at around 5600 dollars, I therefore expect a fresh maximum te the weeks to go after above 20000 dollars.
For the resistance zone the most probable range is from 17k to 21k dollars while for the support zone the range is 11000$-14300$.
The RSI oscillator has dropped almost to the oversold area with its average at about 47 that still has to turn upward to confirm a reversal ter the trend.
With the other template i go after with KAMA average and deviation lines i’ve some doubts that XBTUSD will go towards the interesting long term support zone of 7500-9000 USD.
Ter the event of an unexpected catastrophic news, the support area on the weekly chart rises to USD 4300-5800.
This is the last version of my KAMA indicator (public at tradingview) with default settings tuned for BTCUSD weekly chart.
Te the previous two occasions the very first deviation line held well the druppel, notice how ter the latest November bottom the price wasgoed at an intermediate level inbetween the Kama and the very first negative line, an high bottom interpretable spil a strong signal followed by a strong top (
At the uur the bottom is around 11k usd, done again at an intermediate level while the 7500$-9000$ support area is defined by the 1st and 2nd deviation line.
This support area should work especially if the market goes sideways, it could be a nice zone where to buy with diminished risk of high initial drawdown.
There are no assures that the market will stay sideways enough to test that support area but strategically isn’t a bad stir to buy inwards it with a stoploss below 7000$.
Te part I and II I did a quantitative analysis on altcoins and possible strategies on how to capitalize on their weakness compared to bitcoin.
Te Part III wij will see how to allocate a portfolio kicking off with Fiat currencies.
Te the table below you will find cryptos with relative gains (G) and volatility (RMS) against the dollar using all the historical gegevens available, spil gegevens source wasgoed mainly used poloniex and bittrex exchanges, for bitcoin has bot used Bitstamp.
Te crimson the cryptocurrencies with negative Build up against the USD.
It’s pretty evident that i’ll not consider any crypto with negative Build up and Bitcoin is clearly the winner with the best Build up and low volatility compared to the surplus. I exclude also all the crypto with positive Build up but with high volatility because the main objective is to allocate a portfolio with the lowest possible volatility.
The remaining crypto are:
Ideally it should be allocated the same amount of money on each asset but to compute the fraction of your capital to waterput on each asset i use the same formula seen te Part I &, II.
Where F is the optimal fraction of your capital to wage te a single trade and P the persistence or Shannon Probability, concepts already explained te Part I &, II.
Thanks to the formula F=2P-1 I know how much to wage on each crypto for a total of around 40% of your capital to invest ter crypto. The remaining 60% could be invested ter traditional stuff of your choice (equities, bonds, real estate). But let see ter detail a ordinary portfolio management strategy.
Plain Portfolio Management Strategy
- Maintain about ten, or more, equities te the portfolio.
- Maintain about equal asset allocation inbetween the ten equities.
- Consider the investment horizon from one to four calendar years.
- Be skeptical of investing ter assets with less than a two and a half year history with a ondergrens of four and a half years.
Four plain policies listed ter order of importance, and the 2nd policy is the one that makes the money or the “engine” of the strategy. A brief investment horizon is mandatory because “risk management” is an significant part of financial engineerin g and given enough time, no matter how petite the risk, it will bite.
At the uur there aren’t ten cryptocurrencies that please my needs te terms of Build up (G) and Volatility (RMS) so I have to find a compromise, using only five crypto and, personally, i choose to don’t maintain an identically asset allocation among all cryptos because there is a hefty difference ter terms of size inbetween Bitcoin and the others. Another punt is that many altcoins have less then Two years of history because this fresh sector is relatively fresh so it is difficult to respect rule number Four.
Another significant concept is how frequent to balance the portfolio. Doing it every day is indeed not necessary for the casual long term investor. An interesting choice is to rebalance asset allocation if there is an asset that exceed all the others by 5-10%. Basically when one asset enlargened ter value more than the others, money should be liquidated from the investment, and re-invested te all the others thus defending the gains through investment diversification.
40% ter crypto (click to enhance)
The suggested asset allocation is intended spil very aggressive having almost 40% allocated te cryptocurrencies, I would advise not to go after this if you are overheen 65 or if you have a family with kids. Te this case I would suggest a maximum of 10% invested te cryptocurrencies (e.g. 6% Bitcoin, 4% Ethereum or 6% Bitcoin, 2% Dash, 2% Monero).
Ter the case of a very conservative asset allocation, for who has a very low risk tolerance, I would not go beyond 5% allocated te cryptocurrencies.
Personally i’ve a very high aggressive asset allocation but I’ve all the time and practice to go after cautiously my Portfolio and to act accordingly to fresh information on a daily ondergrond.
Te the future i might publish other updates about the subject with updated quantitative gegevens on altcoins/bitcoin.