Bitcoin setting up for next ATH run, part 1
1) Using an RSI with a 14 day volume moving average creates what I call a consolidation index, C.I. . For proper and full consolidation there should be a lack of a volume trend to fully unwind an overbought price condition and to show that the buyers are not waiting for a lower price, i.e. there some kind of momentum for buyers showing up. The quality of a consolidation after any trend or bubble is determined by how low the C.I. is during the period of consolidation and the overall length of the consolidation. Long time periods combined with extremely low C.I. values throughout the period seems to correlate with an absolute bottom.
Checking historically for low sustained values of the CI over the course of multiple months has led to an absolute downtrend bottom and the early stages of an uptrend, as evidence by the previous signals. The only cancelations of a correct signal is the noise of a mildly overbought condition surrounding heavily oversold condition. This can be placed in the category of a potential setup but may be better suited as an addition to other information.
The first signal is very evident. It maintains no meaningful uptrend in volume while maintaining a consistent and strong downtrend in volume, which allows for the price to depreciate easier yet the downtrend is clearly winding down as time progresses further. Basically Bitcoin's downtrend was milked for everything it had for so long that any amount of buy volume coming in would rocket it up because sellers have come to expect better entries and bigger profits; for explanatory purposes I will assume short positions can be accumulated in some fashion, on exchanges where shorting is possible, such as Poloniex. The earliest stages of a bottom and a reversal is exactly what happened. As the reversal and subsequent early stages of an uptrend occurred and strengthened, the CI would give multiple and varying degrees of signal confidence, with confirmation that each upside move was consolidated well. This creates a setup for the next upside move in a slow, steady and safe manner. Further, this provides a firm foundation for a potential uptrend and/or possibly a bubble because there is evidently more safety when an uptrend occurs. This was also coupled with the fact that Bitcoin made a new All Time High. When Bitcoin does this, historically, it enters a bubble. This situation proved to be no different.
Currently the length of the period in this potential pattern is shorter end of the consolidation time period with the CI not showing above average levels but also not showing any oversold conditions. The actual quality of the consolidation is setting up well, given the current negative state of Bitcoin with a “hyperbitcoinization” bubble bursting(compounded with the futures effect), multiple exchange hacks, further negative regulatory news and the possible belief that all of the big name doomsayers of Bitcoin may be correct; leading to FUD that fuels increased selling. Overall, this means that BTC did not 'get milked for everything it had' because the strength of the change in volume was weak despite a very off-putting environment that could have fueled a much stronger downtrend. Essentially, the CI has remained relatively consistent without extremes. Whether big money/institutional investors have been consistently buying/trading is hard to say. The lack of an extreme condition should be noted and may be best suited for use in conjunction with other metrics to understand what is occurring.
Comparing historical time periods puts the current CI to reach a high level sometime in early/mid June. The importance of this will be outlined in the other part.
Checking historically for low sustained values of the CI over the course of multiple months has led to an absolute downtrend bottom and the early stages of an uptrend, as evidence by the previous signals. The only cancelations of a correct signal is the noise of a mildly overbought condition surrounding heavily oversold condition. This can be placed in the category of a potential setup but may be better suited as an addition to other information.
The first signal is very evident. It maintains no meaningful uptrend in volume while maintaining a consistent and strong downtrend in volume, which allows for the price to depreciate easier yet the downtrend is clearly winding down as time progresses further. Basically Bitcoin's downtrend was milked for everything it had for so long that any amount of buy volume coming in would rocket it up because sellers have come to expect better entries and bigger profits; for explanatory purposes I will assume short positions can be accumulated in some fashion, on exchanges where shorting is possible, such as Poloniex. The earliest stages of a bottom and a reversal is exactly what happened. As the reversal and subsequent early stages of an uptrend occurred and strengthened, the CI would give multiple and varying degrees of signal confidence, with confirmation that each upside move was consolidated well. This creates a setup for the next upside move in a slow, steady and safe manner. Further, this provides a firm foundation for a potential uptrend and/or possibly a bubble because there is evidently more safety when an uptrend occurs. This was also coupled with the fact that Bitcoin made a new All Time High. When Bitcoin does this, historically, it enters a bubble. This situation proved to be no different.
Currently the length of the period in this potential pattern is shorter end of the consolidation time period with the CI not showing above average levels but also not showing any oversold conditions. The actual quality of the consolidation is setting up well, given the current negative state of Bitcoin with a “hyperbitcoinization” bubble bursting(compounded with the futures effect), multiple exchange hacks, further negative regulatory news and the possible belief that all of the big name doomsayers of Bitcoin may be correct; leading to FUD that fuels increased selling. Overall, this means that BTC did not 'get milked for everything it had' because the strength of the change in volume was weak despite a very off-putting environment that could have fueled a much stronger downtrend. Essentially, the CI has remained relatively consistent without extremes. Whether big money/institutional investors have been consistently buying/trading is hard to say. The lack of an extreme condition should be noted and may be best suited for use in conjunction with other metrics to understand what is occurring.
Comparing historical time periods puts the current CI to reach a high level sometime in early/mid June. The importance of this will be outlined in the other part.
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