Four Simple Reasons Bitcoin Bear Market Ended This Week
Updated
TL:DR:
The ADX, SAR, and NVT have both crossed key thresholds with a trendline break. We are now in the early stages of a bull market that will probably last more than a year and a half.
Indicators
Dynamic Network Value to Transactions Ratio by aamonkey
Bitcoin is the name of a payment network as well as the currency used on that network and the smallest division of that currency is the satoshi. This is compared to the dollar, which circulates around the world in the SWIFT system with the smallest division that most people use is the cent.
The Network Value Transaction ratio represents the cryptocurrency’s network value (which is its current market capitalization) and the transaction volume that’s transmitted through Bitcoin’s blockchain over a period of 24 hours. IN other words, how much is money moving around compared to cost of bitcoin. It is closely related to the idea of the velocity of money. All things being equal when the velocity of money picks up things get expensive. It is a fundamental law of money that many Keynesians want to ignore or unintentionally misunderstand.
The indicator is simple to understand. When price is in the green the smart money looks to accumulate/absorb bitcoin and other cryptos and when the NVT moves to the red or even outside the red smart money looks to sell. Bitcoin has limited history but the tendency so far is for the weekly NVT to go coast to coast from the green into the red and it takes well over a year to do so.
Average Directional Index D+ and D-
The ADX quite simply tells you how strong a move is. It uses a true range calculation to measure a D+ that compares previous high to one another. When you have higher highs the D+ in green goes up. The True Range Calculation also compares lows and when the lows are lower the D- goes up in red. When the green line is above the red line the trend is bullish and the higher it is above the red line the more bullish things are. When the red line is above the green line price is trending down.
When they cross it indicates neutrality, or in other words, price has moved sideways long enough that the positive and negative price action neutralized one another. It is possible for the D- and D+ to braid and cause a lot of damage to traders so the indicator is best used as part of a collection of indicators or to confirm a chart formation breakout. In our case we use the ADX D+ crossing above the D- to confirm the break of the long-term resistance line. The break of a long term trendline and other indicators makes it more probable that we will have a sustained increase in D+ and it won't painfully braid.
Parabolic Stop and Reverse
The Parabolic SAR is very similar to the volatility stop which is based on the average true range, but it also has an acceleration factor so the faster that price moves the tighter the indicator is to price. This helps you get out of the top of impulses and can give the indicator a resemblance of a parabola. It can be used to signal a shift in trend and to confirm break outs.
Analysis
The ADX and SAR are closely related indicators (invented by the same gentleman, the departed, J. Welles Wilder Jr.) and they are designed to be used together. They both confirm price has broken out of a downtrend by breaking the trendline. Based on that alone it is very likely we will never close a weekly candle below 16,000 ever again.
The NVT coming out of the value area has twice before signaled the beginning of a bull market and it is no surprise it has occurred very closely in time to the trendline break and indicators flipping bullish.
My Current battle Plan
I currently plan to use a pull back strategy. My bias is bullish so pull backs will be bought, especially those that have bullish divergence. So long as the weekly NVT has not gone outside of the red I or there starts to be some bearish divergence on the weekly I look to buy. I am expecting multiple pull backs greater than 30 percent.
I do a lot of TA on bitcoin as it is the benchmark of crypto. Now it is moving I can aggressively buy alts and judiciously use margin when I see that hidden bullish divergence.
Linked Ideas
I am always glad when I get an idea out before larger platforms do and my Dollar Death Cross post predates most people talking about the death cross and it was something I found independently while doing my analysis for the new year.
The bearishness in the dollar supports my notions that a crypto bull market is upon us. My other linked post shows my absolute banger of an entry into OP. It is actually quite frustrating to be on pull back strategy on OP when it has had no pull daily or 3d pull backs since my entry.
The ADX, SAR, and NVT have both crossed key thresholds with a trendline break. We are now in the early stages of a bull market that will probably last more than a year and a half.
Indicators
Dynamic Network Value to Transactions Ratio by aamonkey
Bitcoin is the name of a payment network as well as the currency used on that network and the smallest division of that currency is the satoshi. This is compared to the dollar, which circulates around the world in the SWIFT system with the smallest division that most people use is the cent.
The Network Value Transaction ratio represents the cryptocurrency’s network value (which is its current market capitalization) and the transaction volume that’s transmitted through Bitcoin’s blockchain over a period of 24 hours. IN other words, how much is money moving around compared to cost of bitcoin. It is closely related to the idea of the velocity of money. All things being equal when the velocity of money picks up things get expensive. It is a fundamental law of money that many Keynesians want to ignore or unintentionally misunderstand.
The indicator is simple to understand. When price is in the green the smart money looks to accumulate/absorb bitcoin and other cryptos and when the NVT moves to the red or even outside the red smart money looks to sell. Bitcoin has limited history but the tendency so far is for the weekly NVT to go coast to coast from the green into the red and it takes well over a year to do so.
Average Directional Index D+ and D-
The ADX quite simply tells you how strong a move is. It uses a true range calculation to measure a D+ that compares previous high to one another. When you have higher highs the D+ in green goes up. The True Range Calculation also compares lows and when the lows are lower the D- goes up in red. When the green line is above the red line the trend is bullish and the higher it is above the red line the more bullish things are. When the red line is above the green line price is trending down.
When they cross it indicates neutrality, or in other words, price has moved sideways long enough that the positive and negative price action neutralized one another. It is possible for the D- and D+ to braid and cause a lot of damage to traders so the indicator is best used as part of a collection of indicators or to confirm a chart formation breakout. In our case we use the ADX D+ crossing above the D- to confirm the break of the long-term resistance line. The break of a long term trendline and other indicators makes it more probable that we will have a sustained increase in D+ and it won't painfully braid.
Parabolic Stop and Reverse
The Parabolic SAR is very similar to the volatility stop which is based on the average true range, but it also has an acceleration factor so the faster that price moves the tighter the indicator is to price. This helps you get out of the top of impulses and can give the indicator a resemblance of a parabola. It can be used to signal a shift in trend and to confirm break outs.
Analysis
The ADX and SAR are closely related indicators (invented by the same gentleman, the departed, J. Welles Wilder Jr.) and they are designed to be used together. They both confirm price has broken out of a downtrend by breaking the trendline. Based on that alone it is very likely we will never close a weekly candle below 16,000 ever again.
The NVT coming out of the value area has twice before signaled the beginning of a bull market and it is no surprise it has occurred very closely in time to the trendline break and indicators flipping bullish.
My Current battle Plan
I currently plan to use a pull back strategy. My bias is bullish so pull backs will be bought, especially those that have bullish divergence. So long as the weekly NVT has not gone outside of the red I or there starts to be some bearish divergence on the weekly I look to buy. I am expecting multiple pull backs greater than 30 percent.
I do a lot of TA on bitcoin as it is the benchmark of crypto. Now it is moving I can aggressively buy alts and judiciously use margin when I see that hidden bullish divergence.
Linked Ideas
I am always glad when I get an idea out before larger platforms do and my Dollar Death Cross post predates most people talking about the death cross and it was something I found independently while doing my analysis for the new year.
The bearishness in the dollar supports my notions that a crypto bull market is upon us. My other linked post shows my absolute banger of an entry into OP. It is actually quite frustrating to be on pull back strategy on OP when it has had no pull daily or 3d pull backs since my entry.
Note
Unofficial new reason bull market is on: The Hash Ribbons indicator just flashed a buy Note
I am going to try and clear up some misconceptions about the post. People that rightfully focus on the purity of price action sometimes don't recall what certain indicators mean. They see this chart and think that my four reasons is really just one reason: price beat the falling trend line and everything looks good because it is derived from the break out.To a very real extent that is true and the indicators might give us some hint that a break out could be sustained, like the ADX and Parabolic SAR.
The NVT is not like that whatsoever, nor is the Hash Ribbon update I posted later. Those are closer to fundamental analysis on bitcion. For the NVT I quote hackermoon - hackernoon.com/measuring-token-velocity-nvt-ratio-e3ce477612d7
Neoclassical Crypto Economics
A long standing hypothesis for digital asset valuation is that increasing asset velocity has a negative price effect on network value. This notion is borrowed from the Neoclassical economic equation MV=PQ. This dynamic is the result of monetary assets’ utility being generated as both medium of exchange and store of value (slower velocity).... In practice, the NVT ratio is mathematically identical to network velocity, using the MV=PQ equation
The velocity of bitcoin picking up is a measure of the volume of transactions and the bitcoin price. Fundamentally the NVT Ratio goes up if volume transactions increase relative to the price index. If you believe Longterm in bitcoin you but when it is at low velocity and sell when it is at high velocity.
This is also where the hash ribbons come in. The higher the hash the more volume the network can handle before it can get congested. The move volume it can handle the more volume people will use. A high hash ribbon rate and a low NTV equal a great fundamental reason to accumulate. When the NVT gets overheated or the hash rate falls (like China banning bitcoin mining) the price falls as well.
Note
Bitcoin is up some 70 percent from when I posted this. I consider this one of my most important ideas of all time and it has no engagement. It is kind of amusing how it is being slept on. I guess by now it is dated.
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