Bitcoin Price Analysis: Elon Musk Edition [Part Two]

Bitcoin Price Analysis Feb 12, 2021

Here's the part that everyone's been waiting for - the charts.

Let's take a look at Bitcoin from a superficial standpoint on the daily resolution:

On the chart above we have:

A) Horizontal support at $30k (well-established)

B) Horizontal support at $33.7k (well-established)

C) Horizontal support at $37k (well-established)

D) Price trending at its ATH without any clear signs of wavering (but we won't know without taking a look at some of our indicators, first)

Librehash Reversion Ribbon V2

Borne out of the PineScript bestowed upon us by the benevolent site admins of TradingView is the Librehash Reversion Ribbon V2.

Designed to be a significantly improved version of the MACD overlaid onto the regular price chart, this indicator is nothing but a thing of beauty.

Let's see what its reading for us here on the daily resolution:

The results thus far are 'feast or famine'.

If we start back a few periods, we can see that the Reversion Ribbon V2 was signaling extreme sell pressure toward the beginning to middle of January:

As the screenshot above makes explicitly clear, the dark red candles - which change color on account of the Reversion Ribbon V2 (another cool feature it has which the MACD completely & totally lacks on every level) - signal heavy sell volume (greater than usual ; 'normal' would be regular, solid red candles).

Followed by:

So we have heavy sell pressure, followed by near immediate heavy buy volume.

One could consider this to be extremely volatile, but the only difference between this price action and what we experienced toward the end of the 2017 bull run is that the price action is still significantly less volatile than it was back then at that time.

Luckily, we don't have to guess about that since we have a finite indicator that's designed to assess the total amount of volatility at any given period of time for an underlying asset.

Librehash Price Bands

Similar to the Bollinger Bands, the Librehash Price Bands are an adjusted version of the BB with some minor changes such as:

  1. Different M.A. type used to determine the centerline
  2. The bullet point above affected our determination for the standard deviation calculation (which creates the outer bands measuring volatility)
  3. Color change with the middle band that's predicated on the crossover of a fast and slow version of the same moving average that was used for the centerline;  to enhance accuracy of the "signals", the Rate of Change was factored into this calculation to control for volatility as well

Below is a quick look at the Librehash Price Bands in "live" time:

As we can see, there has been some increase in the volatility of the price, but none of the price gains that we've seen have resulted in candles that have formed wholly outside of the price bands (which would be an indicator that the price is moving faster than the overall volatility; a sign of instability [and another reason for why we factored in Rate of Change for the 'signals' made by the centerline]).

If we 'zoom in' a little closer, we can see that we would have been "signaled out" on February 10th, 2021 (just a day or so prior) on the daily resolution:

Based on the OHLC calculation (at the top of the page), we can see that this would have put us out at $46.5k, only -1.89% where the current price is at, at the time of writing ($47.4k) - which isn't bad, all things considered.

Relative Strength Index

Per usual, we're going to take a look at the RSI(14) on the daily resolution to get an idea for how loaded up Bitcoin is at the time of writing.

Admittedly, the price action since Musk / Tesla's announcement has been crazy, but not quite as crazy as some may have thought it was (based on the exorbitant price that Bitcoin has been trading at in comparison to where we're used to seeing it).

Take a look below:

All things considered, Elon Musk's announcement almost looks timely, in context.

  • Considering where the RSI(14) is at currently, there doesn't seem to be any  apparent reason to believe that the RSI is "too overbought" to where the bulls should be worried.
  • In fact, at 76.30 (current reading on the daily resolution), there's still a considerable amount of room for the RSI to continue growing.
  • This doesn't appear to be a danger sign right now (this could change over the next few hours, especially as we head into the weekend).

Balance of Power RSI

Another custom indicator by Librehash, the Balance of Power RSI is one of our favorites, given its power to forecast future price action well in advance via its tendency for early divergence.

However, at this point, there is no detectable divergence:

This is extraordinarily significant, because we take a BoP that looks like this to be a clear sign to "stay in and remain strapped". Thus, we will follow suit for the time being.

MACD

We don't tend to look at the MACD in 'trendy' markets like the one that we're in currently (since we have the Librehash Reversion Ribbon V2), but given the recent price action - it figures that it wouldn't hurt to take a peak, so here's what we can see on the daily resolution for Bitcoin:

Unsurprisingly, there are a few observations that can be made from the chart above.

Namely:

  • The MACD has long since crossed above the Signal line (bullish)
  • The Histogram continues to increase period over period; indicating increasing divergence between the MACD and the Signal Line (another bullish sign, which means that the signaled trend is increasing)
  • The MACD and Signal Lines are well above the Histogram (zero line) and continue to elevate, which is the MACD's way of telling us that the trend that the price is in for the underlying asset being tracked is poised to continue (up).

Conclusion

Bitcoin remains tentatively bull for the time being. There are a few on-chain metrics to keep an eye on (namely, the transaction fees) in case anything begins to get out of hand.

Given the media attention that Bitcoin has been receiving lately, it is imperative for bulls that said attention does not become negative (which it easily could) if the transaction fees on the protocol continue to increase or if  any pesky journalists start really digging deeper underneath the surface to get a better idea of what's really going on with Bitcoin and some of the other cryptocurrencies in this space (there is a lot of history that individuals will need to be walked back through on a continual basis, so there's a chance that this won't occur for some time yet).

Tags

cryptomedication

Happy to serve and help wherever I'm needed in the blockchain space. #Education #EthicalContent #BringingLibretotheForefront

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