Will Bitcoin crash to 15K?!! Crypto Risk Index weighs in!
I have talked about the Crypto Risk Index that is updated hourly on www.cryptomarketbuzz.com website in my previous blogs:
- Introducing Crypto Risk Index: the ultimate technical index for your cryptocurrency trading needs
- How I avoided the Nov 2022 crypto crash using the Crypto Risk Index
- Did Crypto Risk Index predict the recent market jump?
In this blog, I will be looking at an interesting pattern in BTC price and Risk Index trends, which can have important lessons for us.
Crypto price and risk index trends usually follow the same pattern, meaning that when there’s a price surge, the Risk goes up and when there is a price drop, Risk index falls with it. In simple words, when price goes up, there’s more demand for investors to get on the band wagon and buy more (especially rookie investors), and therefore there is higher risk of price drop, and vice versa. However, this is not always the case and we have seen in a couple of instances over the past two years (at least).
In October 2021, BTC price surged significantly from around $42K (late Sept) to around $61K (late Oct). We observed an Index jump of around 25 (Medium) to 75 (High) between Sept 22 and Oct 8 2021, but then an interesting phenomenon happened. Price was still going up until Oct 22, but Risk started to drop to around 60 (Elevated). This meant lower risk vs higher price, which was an unseen pattern. Immediately after that, price dropped for a few days with Risk index dropping with it, following by another price hike to about $64K and Risk index of 80 on Nov 12 2021.
Then what happened? BTC went on a downward spiral and settled in the 40s channel for a while.
So what? We have seen a similar pattern between price and risk index since Jan 1 2023. The price has gone up from $16.6K to $22.7K, and has taken risk index up with it from 32 to 80 (Jan 20 2023). But then, price went further up to $23.7k on Jan 29, while the Risk index went down to 75 and has continued downward since then.
Looks familiar? This trend is very similar to what we saw in Oct 2021, which may indicate we should expect another price hike, followed by a significant price drop. Will that happen? No one can predict the future, and only time can tell us exactly what will happen. We shall wait and see. But in the meantime, you should keep in mind that the risk of entering crypto investments, especially for BTC is at 65, which is in the High zone. You may want to wait until risk is in the Low or Medium range before entering an investment.
Final thoughts …
Crypto investing can be highly lucrative, but it also comes with a number of risks. Without a proper risk management strategy in place, investors can suffer significant losses when the markets go against them. As always, my advice is to manage your risks, understand the crypto markets, read the news, understand the assets you are investing in, and have proper exit or HODL strategy before entering any investments.
Keep in mind, the information provided on this blog is for informational purposes only, and does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the blog’s content as such. You need to do your own research and understand the underlying volatility and legal and political aspects of cryptocurrency markets. Also, you need to consult your legal, financial and tax advisors before investing in cryptocurrencies. There are risks in cryptocurrency investments. Do your own research and invest wisely.
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