How relevant is technical analysis in cryptotrading?

A large part of the Oct bitcoin market analysts warned of the approach of the intersection of death, using what is known in trading as technical analysis.

Technical analysis (or abbreviated as TA) is the art of predicting the price movement through the study of charts that show how an asset was traded in the past. You need to find and compare the patterns that were found earlier. It is assumed that past models with a high probability will work in the future.

The intersection of death THAT occurs when the 50-day moving average (MA) falls below the 200-day MA. The emergence of such a crossing is considered the beginning of the bearish trend: the last time this happened in the bitcoin market at the end of March 2018, after which prices went down a lot in the next months.

This intersection is considered a very strong bearish signal, which appeared again on 25 October. That day, bitcoin price closed at $8662, and over the next few weeks fell more than $2000. Some analysts say that the reason for the decline was bad news from China. But supporters say THAT it was all seen on the chart.

«As soon as the intersection of death, we are in a situation, when MA just scream fall,» said 41-year-old trader from Massachusetts, who is known on Twitter under the alias Big Chonis.

He says he earns from $3000 to $4000 a week, relying mainly on technical analysis.

The concept that traders can earn money, just by observing when the blue line crosses the yellow, many investors in traditional financial accounting it seems a fiction. But the bitcoin markets THE ubiquitous. The crypto currency exchange Binance in a recent research report said that after high-frequency trading TA was the second most commonly used investment strategy in the markets of digital assets.

Joe Di Pasquale, General Director, BitBull Capital, argues that TA helps to overcome the excitement, which often leads to too high (or low) prices on the stock market.

Initially THAT was developed for markets where trade has a long history and there is a large amount of data. According to an extensive survey 2015, conducted by three Israeli researchers, TA is superior to analysis based on the fundamental performance of the business.

Many traders say that even more important in cryptocurrencies, because nobody can with certainty determine the fundamental value of bitcoin, which was launched just 11 years ago. Whether it is a hedge against inflation, a digital form of gold? The future of money? It can be all of the above.

«In the absence of any real fundamental news people rely on schedules, prices and volumes,» said Greg Cipollaro, a former Citigroup analyst, who now helps manages the analytical company Digital Asset Research.

Interestingly, even many bitcoin investors who laugh at this «divination», preferring, for example, long-term investment, all follow the same schedules, which ultimately can become a self-fulfilling prophecy. So many people look at those same key levels of support and resistance that the market often behaves in accordance with THAT.

«If you know what everyone else is doing, you understand the trade even better,» said David Martin, Director of investments at Blockforce Capital. «It’s sort of a technical analysis of technical analysis».

Journalists CoinDesk spoke about THAT with a professional capturadora. Here’s what they said:

Joe Di Pasquale, BitBull Capital:

In BitBull technical analysis is a key part of our strategy for asset management and it works well in conjunction with a news analysis to identify likely patterns of movement and the limits of the drop/increase. Since cryptocurrencies are very volatile and speculative, technical analysis provides key indicators of price movement, especially support and resistance.

The recent rise in prices at the end of October, caused a stir in the Chinese media, is a good example of unstable motion based on speculation, which is now back to support around $8100. Technical analysis has led us to believe that the rapid growth of prices, caused by the application of XI Jinping, was ephemeral and will be followed by a pullback just above $8000. The use of technical analysis allows us to trade in this volatility, buying cheap and selling expensive with more confidence.

David Martin, Blockforce Capital:

When I started trading on the stock market (in 2016), I did everything from a purely technical point of view. I don’t understand bitcoin and what it could do, but I wanted to sell them, because he was very volatile. Everything was based on levels of support and resistance, wave cycles, and rebuilds the Fibonacci. We do not use it for Fund — we mainly used the machine learning algorithms. But I see that technical analysis actually works better in cryptocurrencies, because there is fundamental analysis, which is in shares and other asset classes. And what else are you going to trade? For example, if you sell Apple, you can have a lot of external macro-factors that affect the share price. Technical analysis may be part, but not the basis. The stock market is still dominated retail trade, where everyone is looking at graphics. So, if you see what everyone else is doing, you understand the trade better. It’s like technical analysis technical analysis. Once you figure out where all can see support where everyone can see resistance, you can develop your trading strategy based on what he sees the rest of the market.

Martin Garcia, Genesis:

Of course, traders spend a lot of time with technical analysis. When we make trading decision, we look at the fundamentals, and then look at the graphics. We have to consider THAT because cryptocurrencies are less clear fundamental characteristics. By and large, it’s almost a self-fulfilling prophecy. If you are considering technical analysis as a tool in watching a traders, and they all look at the same indicators, they see the same things and accordingly adjust their trading strategies.

Big Chonis:

I strongly believe in technical analysis and the fact that he can determine where we are in the market structure. Since it is a thin market, there is not much price movements that are caused by retail traders. It would take no more than a couple million purchases in the market to raise the price a few hundred dollars — just because it’s a small retail market. I like a broader view — daily chart, 3-day, weekly, to get a General idea of where we are.

Nicholas Merten, DataDash:

I believe that for short-term trading technical analysis is totally irrelevant. The only ONE that would be appropriate, is to use levels of support and resistance you want to get in and out, hourly or daily chart to see when was the last minimums and maximums. When it comes to indicators, I use them only on the weekly chart. It is much easier to assess the momentum on higher timeframe; the MACD on the weekly chart is so good that as a whole can predict the bottom and top. For intraday trading it is not the most effective strategy.



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