No Cause for Alarm in Bitcoin Market

No Cause for Alarm in Bitcoin Market

Bitcoin fell below $7,600 on Thursday, moving closer to the lows the world’s number one virtual currency reached in February.

Mainstream Media and Institutions are fueling fears among some investors that the crypto-bubble is about to burst.

The moves in the Bitcoin market are in line with Fibonacci trading patterns.

Leonardo Fibonacci was a mathematician who was born in Italy around the year 1170. It is believed that Mr. Fibonacci discovered the relationship of what are now referred to as Fibonacci numbers while studying the Great Pyramid of Gizeh in Egypt.

Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers:

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 610, etc.

These numbers possess an intriguing number of interrelationships, such as the fact that any given number is approximately 1.618 times the preceding number and any given number is approximately 0.618 times the following number. The booklet Understanding Fibonacci Numbers by Edward Dobson contains a good discussion of these interrelationships.

There are four popular Fibonacci studies:arcs, fans, retracements, and time zones. The interpretation of these studies involves anticipating changes in trends as prices near the lines created by the Fibonacci studies.

Fibonacci Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence. The most popular Fibonacci Retracements are 61.8% and 38.2%. Note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%.

The price of bitcoin dropped to $7,530, losing nearly 66% of its value (in line with a Fibonacci retracement) since peaking above $19,000 in December. Sell volumes have reportedly increased across all the major cryptocurrency exchanges, with the entire market likely affected by a sharp increase in trading volumes in bitcoin futures at the Chicago Board Options Exchange (Cboe) and CME Group, this is institutional shorting of Bitcoin, to be expected.

As more and more spooked investors are pressing the panic button, bitcoin charts show the cryptocurrency is on its way toward the so-called death cross – a point in a stock’s lifetime where the 50-day moving average (MA) crosses below the 200-day MA. This means that the price has fallen in 50 days as much as it would usually fall during the last 200 days.

The cryptocurrency market has followed bitcoin’s plunge, wiping out most of the gains seen at the end of 2017 and the beginning of 2018. The crypto market cap has dropped to $280 billion, compared to $829 billion in early January, right before the retracement.

Buy the right crypto here and you will make a killing.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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