Now, you can join contests, ace quizzes, read exclusive crypto insights, and unlock your potential in the cryptocurrency world with us. When asked about the recent $1.2 Billion worth of outflow from the Bitcoin Spot ETFs, Saylor replied https://www.xcritical.com/ by saying that he thinks generally that’s a good thing as it created more demand. Bitcoin is a smart money and it is the most liquid and fungible free market in the world.

How to Find Resistance and Support Levels

Before you decide whether you want to invest in crypto, you need crypto volatility trading to know if you’re up for a bumpy ride. Can you imagine losing 30% of what you have in your bank account in one day? If that mere thought made you break out into hives, cryptocurrency may not be a good investment for you. Therefore, this process of individuals all coming to adopt bitcoin in different ways and timeframes necessarily must produce volatility. Volatility is a byproduct of price discovery, and there is no other way for price discovery to happen in a free market. An example of a different good or commodity can help illustrate this, such as oil.

Over-Reliance on Resistance and Support Levels

Even worse, some analysts are predicting that Bitcoin might fall all the way to $50,000 before it recovers. In recent days, there has been no shortage of articles discussing price manipulation in Bitcoin, with clear evidence of significant price manipulation occurring in 2013, and in the 2017 run-up. If history is to be followed, the cryptocurrency bubble had just started to deflate, and there is still plenty of falling left to do. It is the old joke about the man who jumps from the Empire State Building, and on passing the 80th floor on the way down says, „Well, so far, so good.”

Bitcoin Falls Below $60,000. Here’s Why I’m Still Riding the Cryptocurrency Roller Coaster.

• Fidelity Digital Assets does not assume any duty to update any of the information.
• If history is to be followed, the cryptocurrency bubble had just started to deflate, and there is still plenty of falling left to do.
• Without regulation, bad actors can manipulate the price of cryptocurrencies and then cash out rich long before the rest of the investors catch on.
• In their minds, as cryptocurrency evolves, the insecure exchanges and underhanded practices in the industry are stamped out.
• Additionally, using multiple methods (e.g., trendlines, moving averages) can help confirm the validity of these levels.
• And because the supply changes balance out demand changes, this leads to the greater bitcoin price volatility, compared to most other goods and commodities.

It is for informational purposes only and is not intended to constitute a recommendation, investment advice of any kind, or an offer or the solicitation of an offer to buy or sell securities or other assets. Please perform your own research and consult a qualified advisor to see if digital assets are an appropriate investment option. Going back to economic principles, we know that when demand increases for a good, in the short-term the price will rise. The United States witnessed this when the price of oil stayed high enough to make previously uneconomic fracking profitable, which then increased supply. In summary, if demand increases, prices may rise, high prices incentivize increasing supply, which then pushes down prices. That’s why cryptocurrencies that have a lot of coins in circulation experience lower prices than cryptocurrencies that don’t have as many coins in circulation.

Many investors see bitcoin’s price volatility as problematic, but it’s actually beneficial.

With Michael Saylor’s strong confidence in Bitcoin, it’s no surprise the market reacted positively. Bitcoin’s 7% rise in the historically weak month of September suggests that over the past decade, the cryptocurrency has evolved. Recent trends indicate that market panic often creates buying opportunities, allowing Bitcoin whales to accumulate assets and strengthen their positions.

Bitcoin’s 10-Year Volatility Far Exceeds Traditional Assets

If Bitcoin prices hover around $50,000, a larger investor could only liquidate one coin daily. Other investors would begin to sell, and prices would plummet before anyone with more than $50,000 in coins could sell them all off, leading to significant and rapid losses. It is unclear how Bitcoin whales—investors with BTC holdings large enough to influence market value—would liquidate their significant positions into fiat currency without affecting Bitcoin’s market price. If the whales were to begin selling their Bitcoin holdings suddenly, prices would plummet as other investors panicked as well. In the past 24 hours, the cryptocurrency market cap increased by 2.51%, reaching $2.09 trillion. Bitcoin’s price surged by about 6.52%, surpassing the 20 and 50 moving averages.

What Makes the Crypto Currency Market Volatile? 6 Key Reasons

On September 5, Bitcoin dropped into a critical range between $56,600 and $52,500, reminiscent of its volatile August 5 performance when it hit $49,000 twice in one day. Known for its historically weak performance in September, Bitcoin’s drop below $56,600 raised concerns. The purpose of this website is solely to display information regarding the products and services available on the Crypto.com App. You may obtain access to such products and services on the Crypto.com App. These lines represent significant historical price levels where the market has reversed in the past. In fact, there are already skeptics out there who think that the launch of the new spot Bitcoin exchange-traded funds (ETFs) earlier this year may have already messed up Bitcoin’s four-year cycle.

While there are a number of growing use cases to bitcoin, there’s still no clear value to attach to bitcoin prices. Thus, the currency’s movements are more susceptible to sentiment and narrative. Bitcoin remains 4.5 times more volatile than the S&P 500 (7.88%) and four times more volatile than gold (8.92%). This indicates a slight convergence with traditional safe-haven assets, though the difference remains substantial. Over the last 12 months, bitcoin’s average annual volatility stood at 35.48%.

Putting volatility in the right framework

After the hype died down and investors realized the ETF was linked to Bitcoin through futures contracts traded on the commodities market, prices dropped back down to around $50,000. When media outlets announced Proshare’s introduction of its Bitcoin Strategy ETF (exchange-traded fund) in late October 2021, Bitcoin’s price skyrocketed over the next few weeks. Investors jumped at the chance to gain exposure to a cryptocurrency on an official exchange, causing a price jump to almost $69,000. Technical analysis suggests Bitcoin will try to hold its support at $56,600, but the historically bearish trend in September might still benefit the bears. It’s crucial for Bitcoin to stay above this support level; otherwise, it might need to look for support around $50,000 before bouncing back. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price.

Markets are made up of acting individuals, and a large group of those individuals now see value in bitcoin and have therefore acted on that belief by buying bitcoin. But that group did not all come to that belief at the same time, nor in the same way. Each individual had to go through the process of understanding bitcoin and its value proposition. Some may have purchased and held at different times, while others may have first traded it before choosing to make a long-term allocation. Therefore, you cannot remove bitcoin’s volatility without removing the fundamental value proposition of bitcoin. Bitcoin is unique in that it is a good whose supply is completely inelastic to changes in price.

When the price approaches a support level, traders anticipate that it will rise again, making this level a potential entry point for buying. Learn how resistance and support levels for Bitcoin and other cryptocurrencies are formed and how to trade with them. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. The reason is that Microsoft’s stock had a fundamental price to fall back on, as Microsoft continued to turn out and sell its operating system and lucrative Office products. The information herein was prepared by Fidelity Digital Asset Services, LLC and Fidelity Digital Assets, Ltd.

A few of them remind me frequently about bitcoin’s price volatility, which they consider to be a problem. Meanwhile, controversial provisions pertaining to cryptocurrency taxation and reporting requirements made it into the Bipartisan Infrastructure Investment and Jobs Act – a roughly $1 trillion infrastructure bill. Cryptocurrency advocates worried that the definition of a single word („broker”) in the bill could unjustly punish digital-coin „miners” and other people in the cryptocurrency chain, prompting an amendment to quell these concerns. But that amendment was killed before the Senate passed the bill on to the House.

At this point, volatility begins to pick up and price accelerates as we enter a phase where volatility and the percentage of addresses in profit are both high. Of course, past performance is no guarantee of future results and these past correlations were merely that–correlations and not causations. However, we believe there may be some basic market psychology and patterns that answer this question. The bigger it gets (in terms of value), the harder it is to move the price. As this monetary “ship” grows bigger, the ocean can’t toss it around as violently.

It’s not uncommon to hear an opinion from someone heavily invested in Bitcoin stating that the currency will soon be worth hundreds of thousands. Others hype newly invented cryptocurrencies to try and take away market share from Bitcoin. However, most of this media attention and publicity serves to influence Bitcoin’s price to benefit the people who hold large numbers of coins. Volume, the number of units traded during a specific period, is an important factor in confirming the validity of resistance and support levels. High trading volume near these levels indicates strong interest and can reinforce the level’s significance.

The hodlers are bolstered in their efforts to defend Bitcoins' price by the desperate, being folks who bought into Bitcoin when it hovered north of 15,000 and then promptly lost half or more of their money. These poor (literally) folks are doubling-down on Bitcoin, much like a gambler who has lost a bunch of money, and then gambles the balance to try to make it back up. Many of these folks have been buying Bitcoin on credit, and in fact at least one study suggests that as much as 20% of Bitcoin purchases have been on credit. To a significant degree, Bitcoin’s price is being propped up by true-believers, being folks who seriously believe that Bitcoin will someday become the world’s currency and they will thereby get rich because of it. The true-believers refer to themselves by the intentionally mis-spelled term „hodlers”, and have more than their fair share of sovereign citizen and other anarchist types. That cryptocurrencies, including Bitcoin, lack a fundamental price has another ramification, which is that it seems impossible to price individual units of crypocurrency at much above zero.

This is because when there are more coins on the market (meaning less demand), the price goes down, and this is one of the reasons Dogecoin is unlikely to ever reach $1. This applies not only to cryptocurrencies but also to stocks and other financial instruments. Crypto is a high-risk and high-return investment asset class, and trading it requires a lot of analysis and understanding of the underlying technology and market drivers. The information herein was prepared by Fidelity Digital Asset Services, LLC (“FDAS LLC”) and Fidelity Digital Assets, Ltd (“FDA LTD”).

Supply cannot decrease, so there is no countervailing effect from supply, and prices stay low. Saylor also projected that Bitcoin could reach $13 million in the next 21 years, emphasizing the benefits of holding Bitcoin over the long term. Dogecoin, which often follows Bitcoin’s price, also saw a short liquidation of $2.57 million. Of course, a lot of things will need to go Bitcoin’s way for that to happen. But I’m fully expecting a post-election bounce for Bitcoin and another run at a new all-time high by the end of the year.

One of the common mistakes traders make is misidentifying resistance and support levels. — Moving averages (MAs), especially the 50-day and 200-day moving averages, are widely used to identify dynamic support and resistance levels. The moving average acts as a support level in an uptrend and as a resistance level in a downtrend.