Catching the Low of the Bitcoin Plunge

Sat, Dec 23, 2017

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This is the fourth post in the Bitcoin series.

This is the fourth post in the Bitcoin series. If you are just hopping on, here are the links to the other posts:

Post 1: Trading Entries in a Bitcoin Campaign

Post 2: Early Warning Signs of Intermediate Bitcoin Trend Exhaustion

Post 3: How the Worst of the Bitcoin Plunge was Avoided

As Bitcoin plunged thousands of pips on that fateful day, 22nd December 2017, I was still mindful that it seemed like the move was being somewhat artificially generated. The fact that it was occurring on a (Fri)day just prior to Christmas, when most retail traders would be distracted was also not lost on me. I was watching for signs of potential accumulation. And soon, I saw some…in Figure 1.

Figure 1: Sneaky Signs of Buying

Figure 1: Sneaky Signs of Buying

Figure 1 shows the hourly chart of Bitcoin (BTC/USD), which behaved fairly normally until the right edge. The indicator shows accumulation and distribution, and is a way of analysing volume. As the plunge worsened, I began to wonder if an entry was imminent, especially as the indicator abruptly leapt up, indicating buying had begun. As the the lessened volume on the daily chart had foreshadowed the Bitcoin plunge, this little nugget of information began to hint at a potential entry. Just as before, the volume signal was taken as a foreshadowing, not as an entry signal. I began calculating support levels.

Three hours later, price had taken one last plunge towards a level of support, as shown in Figure 2.

Figure 2: Bitcoin Support and a Pin Bar

Figure 2: Bitcoin Support and a Pin Bar

My setup indicators were beginning to go long, and just then my phone lit up with a message from a colleague. It gloated, “Pin bar on hourly Bitcoin. Dare you go long?”

The fact was, I didn’t. I had no intention of wrecking Christmas weekend, and it was already late where I was. With traders (and myself) distracted over the holiday season, I was simply not ready to take a trade that I could not manage properly. Nonetheless, this occurrence highlighted a point I have often noted – experienced traders tend to show up at the same levels in the market. I know – it’s weird. It’s almost as if we know a thing or two.

To keep a long story short, Bitcoin bounced upwards – see Figure 3. I did not enter, and I do not regret it. I believe that there is short term volatility due in the instrument, and I intend to enjoy Christmas. Season’s greetings!

Figure 3: Result of the Entry

Figure 3: Result of the Entry

Kaye Lee

Head Trader Consultant