Step 1: Market Overview
The current Bitcoin market conditions, including factors like the price and the absence of hot money (funds that are rapidly moved between financial markets), have contributed to lower volatility. This lower volatility has led smaller investors to adopt a cautious "wait-and-see" approach. The majority of participants in the market are large-scale players, including whales and organizations. Notably, the number of wallets holding more than 100 BTC has increased to 15,970 as seen in the chart below.
The U.S. interest rate situation is also a key consideration, with a 24.8% probability of an interest rate increase in Q4, as indicated by data from CME Group. It is worth noting that approximately 75% of Bitcoin's volatility is influenced by news events. In line with the information from CME Group, the probability of Bitcoin's price declining is also around 24.8%. In the last 24 hours, Bitcoin (BTC) reached a peak of $29,300, marking a weekly increase of more than 9%. This surge was fueled by growing optimism regarding the potential approval of a spot Bitcoin exchange-traded fund (ETF) in the United States according to an article released by Coindesk earlier today. Any news related to an interest rate hike or events like ETF developments can significantly impact Bitcoin's price.
The futures trading of Bitcoin starts by looking at the weekly chart.
In the chart depicted above, it can be seen that from 13 March to 7 August, there is a general slight uptrend, which is further supported by the MACD indicator. The EMA bars reflected by the MACD indicator is also not as high in volume as compared to pre 13 March 2023. The last crossover reflected by the MACD indicator is on 7 August 2023, and suggests that a crossover may take place again soon. It is important to note that Bitcoin's price can be substantially influenced by any information pertaining to interest rate increases or occurrences such as ETF advancements.
Day Candle Chart Analysis
Next, with the knowledge that there is a general uptrend, let us zoom in to look at the day chart below.
From the weekly chart, Bitcoin's upward trend was broken on August 14th. Therefore, it has entered a medium-term (144 days) downtrend. The MACD shows a bearish crossover, confirming a downtrend at the midline. In addition to the market analysis mentioned earlier, there is a lack of funds in the market, so the medium-term price is gradually declining.
The key to when the medium-term trend will bounce back and return to an upward channel is whether the price of Bitcoin can break through the $31,000 USD level.
Step 3：Day Candle Chart Analysis
After reviewing the weekly chart and understanding the medium-term trend, it becomes clearer whether the current shorting or longing position is more favorable.
By looking at the daily chart and using the Fibonacci tool, you can determine the current support and resistance levels for Bitcoin.
The daily chart shows that Bitcoin's uptrend has not broken the resistance line at $30,980. The main reason for the upward movement is the market's belief that the ETF will be approved, and there is only a 43% probability of the Federal Reserve raising interest rates in the fourth quarter. However, reports indicate that more than half of the Fed officials (12 of them) thought inflation was too high and needed a rate hike on October 19th.
So, once Fed Chair Powell decides to raise rates again, the price of Bitcoin will likely drop. Based on the market conditions and the analysis of the weekly chart, the trading strategy is as follows:
1. Trading Signal
Short: Bitcoin when the price reaches $30,980.
Long: Bitcoin when the price retraces to the first stop-loss line at $29,875 and open a long position.
Since today's price has already touched $30,980, there is not much room for profit in short positions.
Risk: Limited profit potential for short positions. From the 4-hour chart, there is a 50% probability of going short, and the retracement may not reach $29,875, in which case it will continue to go long. In a market with low liquidity, the probability is 50%.
Short Stop-Loss: $31,000
Long Stop-Loss: $29,585
Short Take-Profit: $30,092
Long Take-Profit: $31,000
This content does not involve any leverage usage. Users should determine their leverage based on their financial situation. Trading cryptocurrencies involves risks, so please use leverage cautiously.
The information provided is for educational and informational purposes only. It is not intended as financial, investment, or trading advice. Cryptocurrency markets are highly volatile, and trading or investing in cryptocurrencies carries inherent risks. Prices can change rapidly and unpredictably, and past performance is not indicative of future results. Before making any financial decisions or investments, it is strongly recommended that you conduct your research, consider your financial situation, risk tolerance, and consult with a qualified financial advisor. Any actions you take based on the information provided here are your sole responsibility, and we shall not be liable for any losses or damages incurred. Please be aware of the risks and make informed decisions when dealing with cryptocurrencies or any financial instruments.