The century-old, but widely used, mathematical model of how people make decisions about stocks and other financial assets is in disarray as Bitcoin prices drop below $36,000.
Bitcoin is the largest cryptocurrency by market cap, with over 1 billion USD (the equivalent of 1/15 of the US GDP) in circulation. Its price has risen exponentially over the past year, increasing by over 1,000% at one point. While the price has since stabilized, bitcoin is still worth over 10 times its value at the start of the year. However, the growth in bitcoin prices may not be as dramatic as it seems.
Bitcoin has been rising steadily over the past few months, and this week the price reached a new peak of more than $36,000. As the price reached a new high, though, an interesting question arose: what would happen if it fell? Would it crash? Traders are well aware that bitcoin is a volatile asset, but what if the price went down?. Read more about news btc analysis and let us know what you think.Indeed, the stock price prediction model created over 100 years ago by the pioneer of technical analysis Richard Wyckoff is also at odds with their wild growth predictions. This model, called the Wyckoff Method, involves a five-step approach to identifying price trends, which are primarily related to investors’ psychological response to the supply and demand for an asset. In the case of accumulation, for example, when an asset tends to bottom after a sharp decline, the five phases include, in order, the sell top (SC), the successful secondary test (ST), the last support point (LPS), the sign of strength (SOS), and the bottoms – which indicate increased demand for the asset. Weikoff events and stages in the accumulation process. Source: Stockcharts.com. On the other hand, the distribution case resembles a 180-degree version of the accumulation case, consisting of five phases that follow a strong upward price trend. Wyckoff events and phases during distribution. Source: Stockcharts.com. Preliminary supply (PSY) shows a strong upward shift in demand as prices rise, accompanied by an increase in volumes. However, the uptrend eventually runs out of steam, leading to what is known as peak buying (PB). This decision follows a massive sell-off caused by a lack of demand near the asset’s price threshold in a context of abundant supply. Wyckoff called this correction an automatic response (AR). PSY, BC and AR together form phase A. Meanwhile, in phase B, a feint jump to CB, called a secondary test (SET), is followed by another decline, which is a sign of wealth weakness (SOW). In the B phase, weak attempts to bounce from the SOW to the upthrust (UT) usually occur as well. Later, during the transition to phase C, there is a final shock to the distribution called Upthrust After Distribution (UTAD). In Stage D, there is an alarming drop in demand relative to supply, also known as the last point of supply (LPSY), leading to a collapse in prices in Stage E.
Bitcoin in Phase C
Independent market analyst Tempting Beef has warned followers that bitcoin has entered the accumulation cycle of the classic Wyckoff model. The pseudonymous organization has been tracking the recent increases in the bitcoin market and clearly indicates that BTC/USD could sustain an uptrend above $40,000 amid weakening supply and rising demand. The supply is getting tighter. It] may be ready for phase C. However, Tempting Beef presented a controversial scenario by redesigning Phase A according to Wyckoff’s distribution patterns. The analyst noted that bitcoin’s rebound from the $30,000 low is a sign of PSY leading to BC, AR, ST, SOW and other successive events mentioned in the distribution phases. Wyckoff’s conflicting scenarios appear in the Tempting Beef bitcoin market forecast. Source: Twitter Bitcoin is back in the C phase, which has led to concerns about demand exhaustion at Wyckoff’s distribution events. This would mean that the lowest risk point for cryptocurrencies is on the downside – a collapse in price.
Technical preload down
Bitcoin’s recent correction in the spot market came after a year of rally. Between March 2020 and April 2021, BTC/USD gained 1,582% to reach an all-time high of about $65,000. However, the pair erased more than 50% of its price gain. Prices have broken down, recovered and are now consolidating in a sideways direction, with no evidence of a specific sideways move in the short term. As a result, it now looks more like a Wyckoff distribution model, as the phases follow an annual upward rather than downward movement. Meanwhile, bitcoin is consolidating within a symmetrical triangle structure after a sharp downward correction after mid-May, suggesting that this setup is actually a bearish pennant. Technically, bearish flags cause a price drop by an amount equal to the size of the previous downward movement. A bearish flag on bitcoin sends BTC below $20,000. Source: BTCUSD at TradingView.com BTC/USD is trading at around $36,000, down 44.59% from its high of $65,000 at the time of writing.The Bitcoin price fell by approximately 9% to $36,000 today, and according to the century-old rules of technical analysis, the price should be heading for another big crash. This crash is predicted by a rule known as the Fibonacci sequence. This is a set of mathematical formulas used to predict the movement of prices. The system says the price will fall in a regular pattern of a retracement and then a continuation until it hits a support level.. Read more about ethereum decrease and let us know what you think.
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