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The Psychology of a Cryptocurrency Trend | And More in This Weeks Crypto Update.

Here is Why Ethereum Can Retest $2,000

The classic Elliott Wave theory calls for Ethereum’s (ETH) price to retest the $2,000 psychological level. The Elliot Wave concepts show us that from August 2017 through November 2021, Ethereum has completed a 5 impulsive sequence which naturally should be followed by a 3 wave correction lower.

Ethereum Elliott Wave Analysis

Wave I ended with January 2018’s high, and the subsequent correction that followed marked wave II, which ended with the $81.79 low. Finally, the rally in wave III ended with May 2021 high, and the cryptocurrency resumed lower in wave IV towards the $1,700 low.

The last rally in wave V ended with the current all-time high price of $4,868, which completed the 5-wave price structure.

Down from the current all-time high, we have an incomplete ABC correction. Wave A ended at the $2,159 low, and the reaction higher in wave B could have ended at the current swing high of $3,580. The last wave C is needed to complete this cycle based on the Elliott Wave theory.

Wave C has the potential to develop between the 0.618 and 0.786 Fibonacci extensions of wave A measured against the peak of wave B. Price-wise, wave C can end between $1,906 and $1,451 from where a new bullish cycle can emerge.

Was Bitcoin’s Dip Below $40,000 The Ultimate Bear Trap?

Bitcoin’s (BTC) price had a sudden break below the $40,000 significant psychological level, but the sell-off was short-lived, and the decline was quickly reversed. Investors are now asking whether the dip below the round number was the ultimate bear trap.

Bitcoin Bear Trap?

In technical analysis, the bear trap occurs when the market sells-off traps traders in believing that the uptrend is over and a possible reversal is underway. In a bear trap scenario, the price often breaks below a support level or a key technical point.

The bears got the break below the $40,000 critical level, but so far, they definitely got burned by betting on the Bitcoin price crash.

The technical landscape can give us more clues about whether BTC can hold above $40,000.

Stochastic Oversold

First, the stochastic oscillator bounced from oversold reading, and it expanded higher along with the price. Secondly, we have a hidden bullish divergence between the stochastic oscillator and the price. The hidden bullish divergence is a bullish reversal signal that occurs when the price makes a higher low while the indicator makes a lower low.

Should BTC’s price continue to rally out of its low, the following essential resistance level lies closer to March’s high of $48,240, followed by the $50,000, the next significant milestone.

Crypto Trading 101: The Psychology of a Cryptocurrency Trend

The cryptocurrency market is known to have good trends, but determining the direction of the trend and consequently establishing a bias is challenging even for seasoned traders. However, it will be much easier to establish the trend direction if you know what makes up a trend.

The Psychology of a Trend

At its core, every trend is made up of two components:

That means if the sentiment, or in other words, if a good number of market participants think the same way and start acting (buy and sell) on those beliefs, their actions power the momentum. So that’s how we have the beginning of a trend.

Therefore, bullish/bearish sentiment can turn into bullish/bearish momentum.

Now, the momentum can continue. In other words, a good number of market participants can continue to have the same way of thinking long enough that the momentum has plenty of fuel to keep it moving higher or lower, whichever the case might be, and that movement eventually creates a trend.

The market fundamentals are continually being discounted, and in that discounting process, we’re getting price movement. Then in that price movement, we can measure the psychology of the market.

Finding the trend is something that usually comes with practice and experience for most traders. Usually, traders use the Daily or even Weekly chart to find the appropriate trend. Moving averages are some indicators that can help you identify the current trend as they smoothen out price data.

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