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Finance,  Technology

When to buy bitcoin (BTC) for a profit? A technical analysis (April 2021)

Note: The information in this article is NOT financial advice.

 

Outline

 

In what follows, you will find conditions under which Bitcoin’s price to the US Dollar is likely to rise. The prices of the cryptocurrency are plotted over time. Each price point is the average of prices over a day, and the window represents a year. Indicators, such as Bollinger Bands, Volume, MACD, and RSI will be used to infer the likelihood of the price to rise. (Charts from TradingView are used.)

 Bollinger Bands

bollinger bands - bitcoin
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When the Bollinger Bands are placed against the prices of the cryptocurrency, a pattern can be observed. This pattern can be used to infer when the price of the cryptocurrency is likely to rise and drop. When the price touches or crosses the lower band, it eventually hits or crosses the upper band after some time (see image), and vice versa. Sometimes, the price only needs to gets close enough to either the lower or upper band to observe this pattern (see image). When the midline or mid-band of the Bollinger Bands has a positive (upward) trend, the price tends to stay above the midline, and when the midline or mid-band has a negative (downward) trend, the price tends to stay below the midline (see image).

Volume

volume - bitcoin
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When the price crosses, touches, or nears either the lower or the upper band, there is an uptick in the volume chart (see image). The uptick may occur slightly after the price crosses, touches, or nears the lower or upper band. By an uptick, we mean a rise in the volume, where the volume for the day before and the volume for the day after the uptick are lower than the volume that causes the uptick.

Moving Average Convergence Divergence (MACD)

macd - bitcoin
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When the price has a positive (upward) trend, the blue line of the MACD is above the red line, the farther apart these lines are (or the more they diverge), the more positive the price trend is. When the price trend turns negative (downward), the blue and red lines meet (or converge) and cross each other, and the red line is above the blue line; the farther apart they are, the more negative the price trend is.

Relative Strength Index (RSI)

rsi - bitcoin
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Roughly, when the price rises, so does the RSI, and it goes down when the price drops (see image). When the value of the RSI nears 30, the price tends to cross, touch, or near the lower band, and when the value of the RSI nears 70, the price tends to cross, touch, or near the upper band. When the price crosses the upper Bollinger band and stays above it for some time and the upper and lower Bollinger bands are wider apart, the RSI stays above the 70 line for some time (see image). The trend of the RSI graph tends to coincide with the trend of the midline of the Bollinger Bands.

When to buy Bitcoin (BTC) for a profit?

bitcoin - buy order
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On April 21st, 2021, Bitcoin’s price neared the lower Bollinger band but did not cross it (see image). The MACD lines were diverging, with the red line above the blue line, which suggests the price of the cryptocurrency had been dropping. The RSI value is slightly above 40, which suggests a somewhat high momentum to buy. In fact, the price of the cryptocurrency had dropped from about $63,186 on April 15th to $54,743 on April 21st (9:20 PM UTC). Since the MACD lines continued to diverge, the price might still continue to drop. When the MACD lines start converging, the RSI starts rising, and the trend of the mid-band becomes less negative, the price will be likely to rise.

Last Words

Bitcoin’s price to the US dollar had been dropping a couple days before April 21st, 2021. Based on the indicators, the price may continue dropping past April 21st . When the MACD lines start converging, the RSI starts rising, and the trend of the mid-band becomes less negative, the price may rise again. 




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