Squeezing profit during consolidation periods
In our previous post we talked about the potential uplift effect of bitcoin halving, all on an overwhelmingly bullish background of wild predictions and renewed faith in BTC as digital Gold. A week later, we are looking at a slightly different picture and at the time of writing, the market sentiment is more of a mixed bag like this:
With BTC dropping $300 or almost 2% in just one hour (Feb 13th), and failing to break the $10,500 resistance level, volatility is the name of the game and a Trend is less apparent than a week ago. This is a time when like the famous FX trader Vivek Nair said: “You don’t make friends with the trend, you make friends with each candlestick”! Easier said then done, but more about this in the second part of this post.
Of course, it’s not all bad news and the overall market outlook remains cautiously optimistic despite rumblings from the United States Treasury seeking to enact new regulations governing cryptocurrencies. Correlation is not Causality and the price drop that appeared to be timed with Treasury Secretary’s announcement, remains to be confirmed over the next trading cycle.
Short-term performance remains solid with monthly gains in the 20% range, but we should point out that some analysts are signaling an impending deeper retracement. Thomas Thorntown of Hedge Fund Telemetry recently pointed out that per his Demark Sequential Countdown, which called Bitcoin’s $6,400 bottom, the indicator is printing a potential sell candle, meaning investors should be cautious. Sawcruhteez says on Twitter: “$BTC is on a green 9 on the Daily, 2D and 5D. If this leads to a correction it should be a great opportunity to buy the dip. Will you be ready?”
Others remain bullish and don’t think a major retracement would occur before BTC hits $11,000 to $11,500 levels. Some other historic data shows that an ATH level will not be reached any time soon and each bitcoin cycle would increase in length with relative volatility decreasing as wider adoption takes place.
The above chart indicates that an ATH might not happen before 2021 and a prolonged accumulation phase will continue with possible dips to the bottom of the blue channel still possible.
What is more interesting though is that while the crypto market capitalization just surpassed $300B, bitcoin’s dominance dropped from 70% to 62%.
This has created enough room for altcoins to finally start moving and some, like ETH, XRP, NEO, and XTZ posted huge gains in both USD and BTC pairs. A further drop in BTC dominance and continuing support above $10.3K would most certainly mean that a true Alt Season is upon us. XRP, in particular, saw some incredible action and broke above the $0.30 level but at exactly 14:00 UTC, the price on the XRP/USD pair quickly plummeted from 33 cents to 13 cents, a 60 percent drop. During that minute, volume spiked to $6 million, according to BitMEX data. The cryptocurrency quickly recovered within a second and closed at $0.3277, suggesting a large leveraged trade was quickly wiped out. It is unclear what caused this on BitMEX but the spot market reaction was mild and 4% drop recovered shortly after.
Now imagine trying to manage several tokens across multiple exchanges in these market conditions. Moreover, imagine performing manual trades and trying to update your Stop Limit or Take Profit targets while staring at charts and trying to keep up with the avalanche of news in the crypto media. Even the simple “buy-on-dips” strategy that many recommend in an uptrend market is not easy to manage manually and requires discipline and a solid trading plan. In the market conditions mentioned in the above remarks, we can see how learning to leverage the 3commas.io available trade automation tools can provide peace of mind and great gains on a risk adjusted basis. Let’s assume for a moment that the projections in the chart below are correct:
How would you trade this price action, expected volatility and price swings? Your 3commas team worked hard and launched the Grid Bot as a great solution for passive investors who do not have the time or skill to squeeze every pip in intra-day trading. The Grid Bot embodies a well-known strategy inspired from FOREX trading and involves orders placed above and below a set price, creating a grid of orders at incrementally increasing and decreasing prices. Overall the technique seeks to capitalize on normal price volatility in an asset by placing buy and sell orders at certain regular intervals above and below a predefined base price.
Imagine how well a grid bot would’ve worked since the beginning of the year within the bands showed in the previous price projections. We encourage everyone to learn more about the Grid Bots, now out of Beta, by reading the following tutorials:
https://help.3commas.io/en/articles/3583086-create-ai-grid-bot
https://help.3commas.io/en/articles/3583109-how-grid-bots-work-manual-mode
Or start trading with GRID Bot now
Even better, test various grid trading strategies with your Paper Trading account until you are comfortable with both Manual and Automatic settings. And don’t forget, futures exchanges now available in the Grid bot. Trade on Bitmeх, Bybit, Binance Futures with a leverage.
