February 23, 2020

Influence of market cycles on the price of bitcoin

Throughout the last two years, Bitcoin, the pioneer cryptocurrency has experienced high levels of volatility, starting with a growth of more than 200% during 2017, then decreasing the same percentage in 2018 and currently, the market is experiencing a bull run undertaken from $3,000 until reaching levels of $13,800. The professional trader Alberto Cardenas explains the structural uptrend and the influence of these market cycles on Bitcoin’s price.

Throughout the last two years, Bitcoin, the pioneer cryptocurrency has experienced high levels of volatility, starting with a growth of more than 200% during 2017, then decreasing the same percentage in 2018 and currently, the market is experiencing a bull run undertaken from $3,000 until reaching levels of $13,800. The professional trader Alberto Cardenas explains the structural uptrend and the influence of these market cycles on Bitcoin’s price.

In a conversation with the renowned professional trader of traditional markets, Alberto Cárdenas, different perspectives were exposed with respect to investments in cryptocurrencies, through deep technical analysis that would involve the price of Bitcoin with a large percentage of accuracy. Studying the market from cyclical theory, Cardenas assures that BTC is going through a bull run at a structural level that could surpass the highest historical levels.

Market cycles are defined as the trends or patterns that can exist in a given market environment, which allows some securities or asset classes to have a better performance than others. Although market cycles are often difficult to identify until they have passed and rarely have a specific start and end point, most traders agree that they are a reality and therefore follow trading strategies that try to benefit from the oscillations of the market cycles trying to identify the points of rotation or change of cycle.

Alberto Cardenas has been linked to bitcoin and its ecosystem since 2016, when the investment firm where he worked focused on expanding his portfolio with cryptocurrencies. After this first experience, Cárdenas founded the Center for Studies in Financial Investment, where they teach a program of technical analysis, oriented to cryptocurrencies, with special emphasis on their volatility, a very characteristic feature of this market.

In words of Cardenas:

“From the technical point of view, this characteristic makes them a very special asset and we develop our technical analysis program oriented to this market”

The efforts of Cardenas and his team are based on a series of tools that allow the accurate and concrete analysis of the behavior of the market in order to minimize investment risks and achieve the best results when buying cryptocurrencies.

Technical analysis are always necessary

The technical analysis developed by Cardenas is intended to study factors such as prices, trade volume, candles, patterns, the market structure at a given time and the historical movement of prices from the beginning. Logically, having control over elements so essential for the exchange of cryptocurrencies, the chances of loss are much lower.

Cardenas also explained the importance of studying the intermarket, which is defined as the relationship that Bitcoin has with the USD or an emerging market, in order to measure the risk margin that market participants are willing to assume. Other cryptocurrencies such as ETH, XRP, and LTC are also taken into account when carrying out an analysis of this caliber.

The explanation of his perspective of analysis was immediately followed by the most important aspects of the Bitcoin price during the last months according to Cardenas, as well as the market cycles, bull run, correction and accumulation that the cryptocurrency has experienced. The patterns that involve the increase or fall of your contribution are essential to understand how you will behave during each period.

However, Cardenas emphasized the importance of analyzing the present market widely, without excluding the upward trend experienced during the second half of 2017, where both Bitcoin and most cryptocurrencies had a rise of more than 3 times its value. The professional trader explains that the cryptocurrencies lived a spectacular rally, that although it was not the most important, it was the most mediatic, and it was the one that brought the price of bitcoin to almost $20,000.

Thus, it is easier to understand 2018 as a year of correction, with sharp drops in the price, bringing the value of bitcoin below USD 5,000. No more than 4 months ago, the BTC quotation began a rise guided by the parameters explained by Cardenas.

Deepening the market cycles

According to Cardenas, it is safe to say that this is a price advance, and proof of this is the increase in Bitcoin at the end of June to $ 14,000. This advance, in addition, seems to be part of a new cycle of the bull market, which is beginning and which, for him, will not end soon.

Cardenas said:

“There will come a point where it will begin to correct, but the extension of the new upward movement will remain in time, in my opinion. We have seen the impulsive phase in 2017, correction 2018 and now in 2019 the start of a new impulsive cycle”

In addition, the interpretation of Bitcoin’s price and its relationship regarding the structure of Elliot Waves was discussed, to which Cardenas responded that the significant increase in prices that we witnessed in June must go through a correction. The analyst said that could mean a retraction of up to 60% of current bitcoin prices, to further deepen this upward cycle of the market. It should be noted that an impulsive Elliot cycle, like the one proposed, is based on 5 waves: 3 impulsive waves, 2 corrective waves and then corrective ABC waves, which are visible through the price charts.

At the end of 2018 and the beginning of 2019 there was an important area of ​​accumulation, with an increase in the volume of trade. However, during the current growth, when bitcoin is located in the order of USD 10,000 or USD 11,000, there is a loss in the volume of exchange, that is, it is not sustainable without a loss.

Cardenas warned:

“This gives us to understand that the buying share of the institutional is low, and can mark the beginning of a distribution stage, to take us to a new correction. We do not know where it ends, but we have probably seen the price ceilings this year. “

Cárdenas pointed out that the price of bitcoin could significantly correct if it falls below USD 9,500, and explained the essential points:

The unit value in USD 9,500 is a key area, since it is a base price, where there was great institutional participation. If that correction were maintained and the price falls in that area, “the price would reach USD 6,000-6,500. If they are in the market, in my opinion having a stop loss at that level is very convenient”, according to Cardenas.

Existing correlation between USD and Bitcoin

Cardenas said there is a direct correlation between the US dollar (USD) and the BTC. How does this happen? It is necessary to understand that the correlation is negative, so that when the dollar increases its value against raw materials, such as oil or other markets, BTC and the rest of the cryptocurrencies fall, and currencies are appreciated when the USD falls.

According to the statements of the professional trader, these facts are true if we analyze the relationship between the conflict of the traditional international market, especially between China and the United States, and the growth of market capitalization and the prices of cryptocurrencies.

That the price continues to rise is good news in itself, which has greatly helped the negative correlation between the USD and BTC is manifested in an increase in the price

Cardenas explained:

“When you see that the prices take off from a base where they were asleep and start rising again, the news starts to accompany and returns the interest and optimism for the development. All this makes us think that we are starting a new bullish cycle. I am optimistic about the future of cryptocurrencies”

With a role similar to that of gold, Bitcoin would be the reference currency, through which all cryptocurrencies will be guided to determine their behavior and market prices.

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