Bitcoin's Wild Ride- Volatility Before the Halving and Hash Rate Increase
Bitcoin rose to $7,500 on the week of December 20th, and fell below $7,200 after the Santa Claus rally on he 24th. The 4% drop in price came at a time that has historically been the weakest month for Bitcoin and a mere 6-months before the famous rewards halving. What does this movement signal, and how should traders and investors proceed?
When we look at the chart, we see a technical break from an ugly downward channel. Bitcoin was able to break resistance of $7,500 for a day, which was likely due to leveraged trades. Longs then crystalized their gains, and the asset sank 4% overnight. This occurred during the weakest historical time for the seasonal commodity that is Bitcoin.
As a trader, look to exploit what will likely be a sideways move followed by a break below the lower resistance level of $7,000. I would suggest looking at entering around $6,800 and leaving around $7,400. This trade looks crowded currently, so I am keeping my powered dry and liquid.
As an investor, understand that Bitcoin's increasing dominance of the cryptocurrency marketcap and the impending rewards halving of May 2020 bode well for your holding (hdoling).
Watch the global hashrate. It has increased substantially recently which portents a rise in Bitcoin's price. Miners are increasing their personal holdings before the halving and runup. Historically, the halving has increased Bitcoin's price and has preceded a bull run 6-months before it occurs. Look at what happened to Litecoin during its 2019 rewards halving and the 2016 Bitcoin halving that initiated the massive bull run of 2017.
Sources:
Picture from Pixabay.
https://coinmarketcap.com/currencies/bitcoin/
