Volatility in the last week for the cryptocurrency market

This past week, the cryptocurrency market has experienced a lot of volatility in the price of many digital assets. This may be due to positive and negative news that have emerged with the passing of the week. Today I will analyze the price action of Bitcoin in order to get a sense of what to expect this week and the following weeks.

Fundamentally speaking, Bitcoin as an asset is increasingly being recognized as a viable alternative for investors around the world to protect themselves from inflation. Governments like El Salvador have already gone one step further and adopted Bitcoin as a legal tender in the country. The people of El Salvador can buy a Starbucks latte with Bitcoins if they want to. On the other hand, entrepreneurs around the world are acquiring Bitcoin ATMs, and they are installing them in central places so that more people can acquire this digital asset without the need to create an account in a cryptocurrency exchange.

These last few weeks, the price of Bitcoin has had sharp movements. On a daily time frame, it can be seen that the price of Bitcoin is forming a price chart pattern called a megaphone. One of the main characteristics of this price chart pattern is the volatility of the asset. As can be seen in the chart below, the price of Bitcoin went from making a new all-time high of $ 66,900 on October 21 to falling to $ 56,600 in the days after. A couple of weeks later, the price of Bitcoin rose again and made a new all-time high of $ 68,900. A week later the price fell back to $ 55,600.

Tradingview. Symbol: BTCUSD (Daily Chart / Logarithmic Scale)

The formation of this pattern suggests that there is much indecision among investors. The rejection of a Bitcoin exchange-traded fund (ETF) by the United States Securities and Exchange Commission (SEC) created a pessimistic atmosphere among investors. It should be remembered that the SEC authorized the sale of a Bitcoin futures ETF weeks ago. This Bitcoin futures exchange fund does not specifically track the price of Bitcoin, but instead buys Bitcoin futures from the Chicago Mercantile Exchange (CME) and then issues stocks for investors to speculate with.

Going to a shorter time frame, a price chart pattern called the Inverted Shoulder-Head-Shoulder is forming. This pattern indicates a reversal movement in price and an upward movement. This pattern is characterized because the price of an asset cannot continue to make new low prices and consolidates at a certain level. What does this mean? In the case of the price of Bitcoin, this digital asset made a low price and fell to $ 58,000 (Left Shoulder). The price of Bitcoin consolidated for a few days at that level. Then the price of Bitcoin made a new low price dropping to $ 56,000 (Head). Finally, the demand for this asset became more aggressive at this level and caused its value to rise to $ 59,000 and then have a small retracement to $ 57,500 (Left shoulder) and then resume its uptrend.

Tradingview. Symbol: BTCUSD (1 Hour Chart / Logarithmic Scale)

These price chart patterns that I have mentioned so far are bullish, but before reaching a conclusion and taking a long position, other measures or factors must be considered. For example, the volume. A confirmation that the price trend of an asset will continue is that the volume moves in the same direction as it. In the chart below, the price of Bitcoin does not move in the same way as the volume (Volume on Balance). There is a divergence between the price of Bitcoin and its volume. As long as there is no positive correlation between the two, it is more difficult to be sure that the price of Bitcoin will continue to break records. For this uptrend to continue and continue to grow organically, new capital has to come in and this is reflected in volume.

Tradingview. Symbol: BTCUSD (Daily Chart / Logarithmic Scale)

What happened in the world of cryptocurrencies last week?

  • The Republic of El Salvador has a plan to create the first Bitcoin city backed by Bitcoin bonds. To read more about this news, click here!.

Every Monday, I will publish a technical report on cryptocurrencies and other markets. If you have any questions, please don't hesitate to email me at andres@digitalcurrencyexchange.us.

Note: the information you find in these reports is not financial advice. Your investment in cryptocurrencies or another asset has to be proportional to your level of understanding of it.

Until next time!

*The opinions expressed in this article are those of the author and do not necessarily reflect the views of the administrators of The Crypto Legal blog or the Lawgic Tec association.

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Andres Manrique
Andrés started getting involved in the financial markets in 2017 when he started trading stocks while still in college. Later, he joined a trading academy to improve his skills in trading stocks, forex, and options. In 2019, when Andrés graduated from university, he started working for a financial publisher that opened the door for him to learn more about digital currencies. Andrés has trained hundreds of students on how to open exchange accounts and digital and cold storage wallets to obtain maximum security and custody of their cryptocurrencies. This work experience gives you a good understanding of the ins and outs of the industry. Andrés has a technical degree in Administration and International Business from Cibertec in Peru and a Bachelor of Science in Finance from Palm Beach Atlantic University in the United States. He is currently preparing to obtain a designation organized by the CMT Association and become a technical analyst.


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