The recent market-wide flash crash has taken many by surprise. At the time of writing BTC is down, around $9,600 after falling as low as $9,300. According to data from Skew.com, a leading cryptocurrency data provider for derivatives, over $120 million worth of BitMEX long positions were liquidated in this massive flash crash.
In less than 24 hours, market sentiment has turned bearish with many analysts talking about the potential for a deeper correction. Across Bitcoin, Ethereum, and other altcoins, a rapid drop wiped out billions from the crypto market and reactions from notable analysts on Twitter who “officially” announced the dawn of a new altseason are now more muted. XRP, in particular, who many believed that the 680-day long bear trend is about to turn into a massive rally, collapsed instead from $0.31 to $0.27 within just a few hourly candles.
Is this the end of XRP or other major altcoins that followed BTC off the cliff? Probably not, but each of these major swings will continue to test traders’ and investors’ mettle alike. The fundamentals remain strong and it’s only normal that savvy traders would take some profits on the upswing. According to CZ, CEO of Binance, the Bitcoin price, has not yet adapted to the upcoming block reward halving, and he also points out that miners will not be willing to sell bellow the price of production, concluding that “the demand side is increasing while the supply side is decreasing”
CZ’s bullish sentiment is mirrored by other analysts who point out the correlation between mining difficulty and bitcoin bottom prices. The analyst @100trillion USD, also known as Plan B, tweeted the chart below. It’s based on a ratio of current price over bottom price ($3.7k — December 2018) against time and represented by mining difficulty. Current mining difficulty is at 80,000 blocks and based on the previous three cycles, there is room to grow up until the cup ceiling (dotted line).
Other strong indicators saw Bitcoin’s ascending 50-day moving average cross over its 200-day moving average. This rare bullish sign is known as a “golden cross,” and it suggests that Bitcoin can hit $26,000 in just two months thanks to this bullish event that previously triggered 170% price gains.
The fact remains that, as a new asset class, Bitcoin and the crypto market at large, remain highly volatile and subject to violent reactions to so many external factors that often time render predictions and even deep technical analysis futile. As Bloomberg notes, “Bitcoin volatility is back to levels not seen since early November, with the bulls and bears sparring at the $10,000 price level”.
As the title suggests, it is exactly this level of volatility that creates significant profit opportunities for crypto traders. While some can leverage our Smart Trade terminal or infinitely configurable Advanced bots, we understand that not all our users have the knowledge and skill required to create their own trading strategies. In the previous post, we talked about the Grid Bot and how to effectively configure it to secure profits in a volatile yet ranging market. If you find the Grid Bot or Advanced Bot configurations intimidating, let’s look at some even simpler options that less experienced traders can use on 3commas.
Meet Gordon, your friendly bot that only requires you to pick a trading pair and select from three risk profiles — Conservative, Moderate or Aggressive. All Gordon bots rely on the same logic and the concept of “Base” as determined by volumes, Support, and Resistance levels. When a “base”, resulting from periods of consolidation, breaks and is followed by a panic dive like we just witnessed, the typical reaction is a bounce and that is the exact moment that Gordon takes advantage of.
With 3commas, this strategy is fully automated. You don’t need to identify “Bases”, you don’t need to set up alerts or make any manual entries. The risk levels described differ by the time frame used and frequency of buy/sell cycles within a given bounce following a break below the “Base” price. For less frequent and of course less risky trades, choose “Conservative” — For those with a higher risk appetite the “Moderate” or “Aggressive” modes are available and work on the same principle, except that “Bases” are established on more granular time frames. An one (1) Hour bar chart is slow and you’ll often see that a bounce may take 12–24 hours to play out.
If you can think of a better, safer, and more convenient way to “buy the dip”, we would like to hear from you. In the meantime, give Gordon a try and of course, feel free to practice and learn with the “Paper Trading” account.