Bitcoin Price Action — Managing the Range
In the volatile nature of crypto assets, trends are often followed by price remaining stagnant for some time, ranging to consolidate and distribute the gains that were made in the previous upside/downside trend. When price starts to range, it could take many weeks/months to breakout. During this period, impatient traders and weak-willed investors give back most of their gains, and become bored with the market. While the resilient ones are either accumulating and preparing for the inevitable breakout.
-Signs of a potential range
During an uptrend: After price peaks and grinds to a halt, the first major correction is usually anywhere between 20–30%. Mark swing lows and swing highs, and play very close attention to the deviations of both sides, this will be the guide to riding the next trend. In this case below (Fig.1) while price corrected, it held the midrange of the swing high and swing low and popped back up to the upside. However, this was a deviation because we ended up breaking back below to the range, and retesting the midpoint (Fib level 0.5 in example charts) once again.
Signs of a breakout: Once price starts consolidating above the midpoint of the range for a meaningful amount of time (time varies). Buy that consolidation. From experience, the acceleration of the breakout is directly correlated to the amount of time price spent ranging. The longer the range: the more explosive the move and vice versa. Most of the time it’s unlikely you’ll get the chance to buy the retest because of the fast nature of the move.
Sentiment: In that time price spent ranging above the midpoint, many traders, investors are getting in leveraged positions, some long some short but overall market sentiment will usually be easy to tell. Overly Negative/ funding rates on derivatives during consecutive dumps, trapping short positions while the overall range structure is still holding. This will result in a massive short squeeze to the upside. All topside liquidity (Fig.2) will be taken, cascading the price and collecting bounties that were set on shorts positions. (Rocketing the price up)
Navigating: When price starts to breakdown, its best to wait a few days for price action to start to develop. This will give you time to identify the swing low and highs that happen early during the range. From there, those swing lows highs will get deviated from a few times. The high probability for a long setup is to usually wait until after the first 1–2 deviations and when price starts closing back inside the range again. Few examples of these Bitcoin rallies are as follows:(Fig.3) (Fig.4)
In Macro-Ranging environments when Bitcoin starts trading in bigger ranges for months. Mini-ranges start to form in between the bigger range. The key is pattern recognition and figuring out very early what levels price is consolidating in between. Ideally, the best entries are when dealing in the smaller range, as long as price is holding the midpoint of the larger range
The future is very bright for Bitcoin. It’ll succeed not only as a potential multiple-trillion dollar asset class, but as a digital store of value that will only continue to become scarce as the world becomes awake to faulty governments freely printing and devaluing their own currency. Every generation gets a gold rush, Bitcoin just happens to be ours. Looking forward to $50,000 and beyond, Inshallah.
