Bitcoin

Bitcoin Bull Run: 100-Day Moving Average is Not Enough

Explaining the investor emotional cycle to BlockPublisher, Boss Cole, founder and CEO of Bitcoin investing academy, Boss Crypto had said;

We are near the bottom, in psychology and the overall emotional cycle. It does not, however, insinuate that we are at the bottom in price however the odds are in the favor of that bet being correct.

A while back Ethereum rose from the ashes reaching $150 mark, rising from below $100. Due to the unpredictable yet healthy rebound of the king of altcoins, the market anticipated the beginning of a bull run. The experts, however, were still confused relating to the fact whether this move would make an actual impact on the whole crypto market. Anthony Parker, the founder of Cuberoot64 suggested that Ethereum’s rebound might not help the market as much as a BTC rebound would have. Talking to BlockPublisher, he stated;

It’ll (Ethereum’s rebound would) help, but the whole market will recover if BTC rebounds.

Bitcoin (BTC) holds 52% dominance in market cap where ethereum (ETH), though the second largest, holds only 11.5% of it. Most of the exchanges do not allow to buy alt coins directly, instead, BTC has to be bought first and it can then be converted into an altcoin. This makes BTC the most liquid currency, and an increase in BTC’s valuation mean that people are investing in altcoins and BTC both. When BTC shows a little intent of moving up, it pulls the whole market upwards due to its large market cap dominance.

After a period of more than one month, Bitcoin had finally crossed the price point of $4,000 signaling hope for the retail investors. The price shot above $4,000 briefly and is standing near $3,900 as of press time. The exciting news for investors is that bitcoin has crossed the 100-days MA (moving average) line after 5 months. For those who understand how moving averages work, it might be a signal to buy as it can be the time that the momentum gets going. As for the rest of the market, the greens show healthy growth in the past day.

Bitcoin price charts
src: coin360.io

How do moving averages work?

In a particular market, the trend cannot be analyzed by simply looking at the surging and plunging prices at a given time. Taking a period and analyzing the momentum and trends based on the historical background of the performance charts give a better idea of what the investments might yield in the future. Moving averages give a better picture of what the market might bring based on historical trends. They merely eliminate the extra noise in the market, made by randomized surges and plunges and smooth out the market trend. Markets tend to oscillate around the mean, which then creates overbought and oversold events.

An oversold event of the market is considered an opportunity to buy a particular product, Bitcoin in this case. While in an overbought situation, it’s best to sell. Looking at the graphs below, an oversold event is when the market moves below the moving average line, while an overbought event is when the market moves well above the moving average curve. Looking at the position Bitcoin is standing at now, is the breakpoint of a trend change. If it is true, bitcoin’s trend change would help the market go to an uptrend (the act of the market moving above the 100-day moving average), naturally triggering a short bull run (If the market crosses the 100-day moving average it is considered bullish).

Bitcoin moving average chart
src: tradingview

There are other moving averages like 200-day moving averages and 50-day moving averages. The 200-day moving average fails to identify the quick changes in the market, while the 50-day moving average shows the quick changes but fails to show the performance of the overall market in the long run and how the momentum flows, so the 100-day moving average serves to be a medium point for analyzing. 50-day and 200-day moving averages are also used widely for market analysis.

Moving averages alone are not the factors that could help push the market up. Regulations around crypto industry, technological advancements in blockchain and institutional interest development through an ETF are some of the key fundamentals that can ensure a bull run.

Regulations could help bring crypto to the mainstream, also helping with bringing in institutional investments by legal support. The downside, however, is that whether or not crypto should be regulated, is still an ongoing debate. According to most experts, regulating the crypto space would ultimately strip away the gist of blockchains and crypto. Comprehensively explaining the mixed sentiment to BlockPublisher, Deepak Jain, the CEO of Swych explained;

“Regulations will relate to the actual usage of the technology. Use of cryptocurrency as a capital raising methodology should be regulated. Use of cryptocurrency/blockchain as a money movement platform should be regulated albeit by a different authority. Similarly, there might be use cases for cryptocurrency/blockchain that might not need to be regulated (such as a private ledger to manage a supply chain or inventory etc…).”

The SEC may be skeptical relating to the approval of Bitcoin ETF due to the security and volatility issues, but if approved, it would naturally open gates for institutional investors to dive into the crypto space and would help the market surge dramatically. Talking to BlockPublisher, Co-founder of Delphi Digital, Kevin Kelly had said;

“The approval of a bitcoin-backed ETF will likely boost the price of BTC (and as a result other crypto assets) if history serves as any guide. The launch of gold-backed ETFs in the early 2000s granted a wider investor base access to the yellow metal. The increased demand for these products and the broad weakness in the US Dollar helped spur the multi-year run up in gold prices from ~2002-2011.”

Bakkt is also being termed as one of the leading factors that might trigger a bull run by bringing in the required institutional investments. Bakkt, by forming a secure trading platform, with the support of major brands like Starbucks, Microsoft and BCG can help flood in the institutional investments, ultimately triggering the bull run. CEO of Bakkt, Kelly Loeffler, had said;

“Bakkt is designed to serve as a scalable on-ramp for institutional, merchant and consumer participation in digital assets by promoting greater efficiency, security and utility. We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.”

Scalability also contributes to the BTC bull run by transforming crypto into an alternate medium to VISA and Mastercard which already provide thousands of transactions per second (TPS), while Bitcoin still provides 7 tps. With the scalability issue solved, not only will crypto be seen as an investment opportunity, but also as a transactional currency, naturally raising the trading volumes sky high. Kevin Duffey from Next Level Finance, believes that billions of dollars have been invested and a much higher spike than 2017 is expected because of technological developments. He wrote to BlockPublisher;

Thousands of the world’s best engineers and programmers are working on the platform, and billions of investment dollars are fueling major companies and initiatives in the space. In other words, the progress of the platform will continue. As long as that happens, it’s only a matter of time before another spike occurs.

All the investors who’ve retained their investments for a long time now due to the crypto winter, should now keep an eye on the market moving above the moving average curve. If the uptrend momentum is established, we’re in for a bull run once again!

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Shehryar Hasan

Performing artist, guitarist and sub-editor at BlockPublisher. Shehryar is an electrical engineer and blockchain enthusiast. He holds investments in bitcoin, ethereum, OST, TRX and Ripple. Email: shehryar@blockpublisher.com or contact the editor at editor.news@blockpublisher.com

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