Bitcoin does not represent the value of the Bitcoin system; that is, it does not represent its equity. The Bitcoin system is its accounting system. For Bitcoin’s value to grow, it is best not to change.
Bitcoin is a commodity, and the value of a commodity is determined only by supply and demand. When demand is high, the price rises, and when demand is low, the price falls.
The expectation of demand affects the rise and fall of Bitcoin prices. The impact of news on Bitcoin is multifaceted and not as easy to predict as commodities. The trend of Bitcoin affected by news is related to the US stock index, mainly the technology stock index.
What affects the price of Bitcoin is futures. Futures predict changes in demand. Since Bitcoin does not have the characteristics of commodities, Bitcoin futures reflect market news. The impact of futures often leaves a long pin line on the Bitcoin technical K-line chart. This pin is caused by futures amplifying the effects of news. Bitcoin’s status is equivalent to the 7 golden flowers of the US stock market. The K-line pins are many and long, reflecting the intense speculation and bringing more short-term opportunities.
Futures are more affected by news than spot, and futures are set in advance. You may find your position closed after a night’s sleep. Futures are sensitive to news and affect the price of spots. The sudden increase or decrease in demand for spot prices may not necessarily be stimulated by news but, in turn, affect futures. Futures are risky. For retail investors, if you can’t watch the market in real-time, it is best not to participate.
Wall Street’s intervention since the beginning of 2024 has significantly reduced Bitcoin’s volatility. However, there is still a $49,000 pin, perhaps because Bitcoin is a global market and Wall Street has a work schedule.
The main funds of Bitcoin have changed. The main force now is the capital tycoons on Wall Street. Their way of playing is the way the stock market and futures are played now. They have become the new dominant force in Bitcoin, and the pricing power is in their hands.
There is no fundamental change in Bitcoin. Stocks and stock indexes have fundamental changes, and news that affects fundamental changes has little impact on Bitcoin. Of course, market sentiment is contagious, and Bitcoin is bound to be affected by negative emotions, giving futures speculation opportunities. Once the market calms down, it will rebound quickly, so the pin is an opportunity to cover positions and bet on short-term.
Since there is no fundamental change in Bitcoin, technical indicator analysis is more effective. The indicators to observe are:
1. Changes in Bitcoin computing power. The growth of computing power indicates that the price of Bitcoin will rise. And every big rise will bring about the growth of computing power. The growth of computing power constitutes the price bottom of Bitcoin. In the long run, Bitcoin hovers at the bottom of computing power. This bottom is a range because the costs of miners are different.
2. Hoarding index. The bitcoin that has not moved for a year is around 65% -70 %. This year’s one-year hoarding index has dropped from 70 to 65. The reason is the turnover of Wall Street spot ETFs. They have held the coins for less than a year. Adding the coins in their hands is the accurate hoarding number. The hoarding curve of the website M Square is a lagging indicator. It is also a long-term indicator. Observing the hoarding index can calculate the funds participating in the transaction. The transparency of Bitcoin is better than that of stocks. So it is easier to calculate.
3. The inflow and outflow of stablecoins. Observe USDT and USDC mainly. It is a leading indicator.
4. Rainbow chart. It is an indicator of exponential growth. The basis is the Internet Metcalfe’s law, which states that the value of the network is equal to the square of the number of nodes in the network, and the value of the network is proportional to the square of the number of users connected to the network. However, since the value of each user in the financial system is not equal, the larger the funds, the stronger the linear relationship between the price of Bitcoin and the amount of funds involved, and it may also reach a proportional relationship, so the exponential relationship does not hold. The concerted actions of significant funds determine the rise and fall of prices, which has little to do with the number of participants, and the predictions of the rainbow chart are becoming less and less reliable.
It is difficult to judge the top of Bitcoin because Bitcoin has no top. The top is determined by news and market sentiment. Once the surge occurs, the computing power will increase, raising the bottom. The top is generated when the market news constitutes substantial benefits. For example, the central bank decides to hoard Bitcoin. The price has a long period of rise based on the expectation of substantial benefits, and how high it will eventually rise depends on the entry of funds. The rainbow chart is not useless because Bitcoin has a bottom but no top. It can describe the top of Bitcoin, which has not been reached in recent years.
5. The exchange’s technical chart indicators reflect trend changes more effectively than stocks. This is because Bitcoin has no fundamentals and insider information.
6. The rise of Bitcoin’s computing power bottom brings about a trend of Bitcoin rising. Every time it falls to the computing power bottom, it is an opportunity to buy. Note that this bottom is gradually raised. The computing power bottom pin of the fourth cycle is 16,000, the fifth cycle is 49,000, and the position where the pin is retracted is the possible purchase position.
7. Bitcoin’s independent market under the calm news. There must be a reason for the inexplicable surge. It’s just that the market doesn’t know. For this kind of surge, when it stops rising, it is the time to sell. There will be a decline because there will be no consistent market without the stimulation of the news.
8. When the emotional side subsides, the coin price will fall. Small news will be digested in about 3 days.
9. All rules will become less and less effective once disclosed.
This article does not constitute investment advice.
#BTC @DW20 @zhuweisha2
