Bitcoin: The Swift Recovery
All companies have felt the recent hardship of COVID-19 which has decimated economy’s over recent months even cryptocurrencies aren’t immune to the lingering affects of this crisis. Bitcoin saw some damage where it fell as low as $5000, for reference the cost to mine 1 Bitcoin is about $7,577.51 that means that the price was below the cost of production. INSANE. Right now Bitcoin has seen a revival of its price to values seen before the crisis, we’ll be taking a technical look into what this means and what this might entail for the price moving forward.
The Ultimate Oscillator tries to be very true to its name and is a technical analysis tool used to measure momentum across three different time frames. Simply put it is a way to measure buying pressure. When buying pressure is strong the ultimate oscillator rises and conversely falls when buying pressure is weak. The graph is formulated from the 3 different time frames giving the highest weighting to the short time frame but still factors in longer time frame. This is all done in an effort to minimise the affects of false positives seen in other oscillators that only use one time frame. To get some insights from this indicator we’ll be looking at the peaks and troughs of the graph, we can see that at the end of April and start of May there are two overbought peaks which shows a bearish diversion signal as the ultimate oscillator forms a lower high as the price of the commodity forges a higher high. Put simply its a sell signal.
The Awesome Oscillator is kind of okay i guess. It’s used to measure market momentum and calculates the difference between a 34 period and 5 period simple moving average. The Awesome Oscillator is generally used by analysts to confirm trends or to anticipate possible reversals when the bars cross above and below the 0 line indicating buy and sell signals respectively. As it is in this case, it is not reaffirming a sell signal but is actually in the state of a buy signal. That is why it is so important to never base judgments of the first piece of information that comes to hand. As an investor it is so important that we consider all the facts before making a decision because that’s the only way we can ever be sure we can make the right one.
The Relative Strength Indicator (RSI) is a specific indicator that is used to detect if a commodity is oversold or overbought. The RSI is calculated using average price gains and losses over a given period of time. With the default time periods being 14 having values bounded from 0 to 100. A reading above 70 means the commodity is overbought highlighting a bearish signal saying that the stock might fall in price. This is the case with Bitcoin indicating that it might be overbought, as it is right at the top of the RSI Indicator level at 70 indicating that it is likely that it might fall in the future. In other words a sell signal