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Bitcoin may see relief rally to $11K after Dollar Strength Index soars

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The price of Bitcoin (BTC) has been stagnating in recent weeks, as it couldn’t break above $11,000 and couldn’t drop below $10,000, the ultimate sign of a continued range-bound structure. 

Such a range-bound and sideways structure could strengthen some relief on the markets, as the altcoins — especially the DeFi sector — have seen massive selloffs in recent weeks.

However, what’s next for Bitcoin as the futures expiration day is tomorrow, which most likely will cause short-term volatility? 

Bitcoin is still waiting to fill the CME gap as the downtrend continues 

BTC/USD 1-day chart. Source: TradingView

The daily chart is showing a clear downtrend since $12,400. The fakeout above $12,000 marked the end of an uptrend with a clear rejection of the $12,000 level as confirmation.

As the chart shows, constant lower highs are fabricated, initiating that the price is in bearish modus since this peak high. First of all, the $12,000 level was confirmed for resistance, and after that, the $11,100 area flipped from support to resistance. 

Given that the current trend is down, a further downward drop is looking more likely after $10,000 to make another lower low. The next support level can then be the CME gap at $9,600, which is still unfilled.

BTC/USD CME 1-day chart

BTC/USD CME 1-day chart. Source: TradingView

The CME chart shows the gap that’s still unfilled. As the majority of the CME gaps get filled, it’s also likely to expect a close of this CME gap in the future. 

Will the U.S. Dollar Currency Index now consolidate?

DXY Index 1-day chart

DXY Index 1-day chart. Source: TradingView

The primary scenario for the weakness across assets is the strengthening of the U.S. dollar. Globally, concerns and fear for another round of lockdowns due to the coronavirus caused the markets to pull back. 

Commodity, crypto, and equity markets have been showing weakness in recent weeks, with investors flowing into “safe havens,” namely the U.S. dollar.

However, as the USD is fighting a potential resistance level, a correction is now likely. Bitcoin and other assets might see a relief rally if the USD corrects.

Possible scenario for Bitcoin 

BTC/USD 1-day chart

BTC/USD 1-day chart. Source: TradingView

Since the price of Bitcoin is now resting on a support level and the U.S. Dollar might be topping out, a relief rally may be expected. However, one bearish factor is the recent negative market sentiment, which is a heavy argument against a short-term relief rally.

Nevertheless, the crucial level to break to the upside is the resistance zone around $11,000, which is most likely not going to break in one go. Bitcoin’s price has shifted to a downtrend since $12,400, where a clear bottoming structure should be defined before any further upward momentum can be expected. 

In any case, a rally towards $10,700-11,000 is on the tables, as the 2-hour chart shows. 

BTC/USD 2-hour chart

BTC/USD 2-hour chart. Source: TradingView

Additionally, the chart is showing a possible bullish divergence. This bullish divergence is confirmed once the price of Bitcoin makes a higher low at $10,350-10,400. If that occurs, a potential relief rally towards the upper resistance zones is likely.

However, this relief rally can’t be stated as a potential bottoming structure on the markets in general. After a big impulse move, consolidation and accumulation take a long time before a new impulse move can start. 

As the recent one occurred in August (from $10,000 to $12,400), it’s likely to expect several months of sideways consolidation before new fireworks may occur. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.





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3 altcoins whose tweet volume spiked before a strong rally

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On Crypto Twitter, a surge of attention directed at a coin often comes in response to dramatic price action. Quite naturally, rallying assets attract the attention of traders and take over Twitter conversations, which can also create positive feedback loops that further prop up the momentum.

This is exactly what happened with some of the coins that saw a greater increase in average daily tweet volume this month, compared with the last. KuCoin Shares (KCS), which went up from $7.40 on July 4 to $14.20 on July 14, generated a staggering increase in average tweet volume, totaling more than 1,100% month-to-month.

Another big winner in terms of price, Axie Infinity (AXS), added 456% in tweet volume over the same period. In both cases, tweets mirrored the rallies’ dynamics, with the tweet volume curve closely following the price chart.

In other cases, however, the relationship can be reversed. Sometimes, the Twitter crowd picks up the news or emerging narratives that the wider market has yet to absorb, producing tweet volume spikes that come before price increases. Is there a way for traders to spot these dynamics early enough to gain an edge over the rest of the pack?

Data intelligence for early birds

Tweet volume is one of several metrics used to calculate the VORTECS™ score, an algorithmic indicator that compares complex patterns of market and social activity of an individual digital asset to years’ worth of historical data.

Exclusively available to Cointelegraph Markets Pro (CTMP) subscribers, the algorithm assesses parameters such as the market outlook, price movement, social sentiment and trading activity to generate a score that shows how suitable conditions of the observed combinations are for any coin at any given time.

On top of that, there is a dedicated space on the Markets Pro dashboard featuring assets that see abnormal tweet volume in real-time. Once they are alerted that something is brewing around a coin on Twitter, traders can be incentivized to take a closer look at the asset and make a judgment as to whether its price is likely to go up soon.

Here are three examples from the last thirty days where Twitter activity foreshadowed price action.

Crypto.com Coin

CRO’s Price vs VORTECS™ chart. Source: Cointelegraph Markets Pro

In the case of Crypto.com Coin (CRO), the source of Twitter users’ excitement is crystal clear: A few hours before the coin flashed on Markets Pro’s Unusual Twitter Volume box (red circle in the chart), it emerged that CRO became the first digital asset platform to partner with the Ultimate Fighting Championship, or UFC. The announcement was also delivered to Markets Pro users seconds after the original source published it, thanks to the platform’s instantaneous NewsQuakes™ functionality.

Unsurprisingly, the big news triggered a sprawling Twitter conversation. If traders had not been convinced by NewsQuake™ and coin’s rising VORTECS™ score, the skyrocketing tweet volume could be the final argument in favor of opening a CRO position. The coin had been valued at $0.113 when tweet volume peaked on July 8, and it kept climbing in the next four days, eventually hitting $0.132 before the price began to decline.

Quantstamp

QSP’s Price vs VORTECS™ chart. Source: Cointelegraph Markets Pro

Establishing what had triggered the surge of tweets referencing Quantstamp (QSP) around June 1 is less straightforward. One potential reason could be the launch of oneFIL, a stablecoin for the Filecoin community, around that time.

The protocol behind oneFIL is audited by Quantstamp. While QSP generates just a handful of Twitter mentions per day, on July 1 it got over 150 tweets, immediately putting it on the Markets Pro radar (red circle in the graph). While the peak tweet volume corresponded to the QSP price of $0.030, the coin pulled off a strong performance in the following days, reaching $0.034 on July 4, continuing to push further.

Flow Dapper Labs

FLOW’s Price vs VORTECS™ chart. Source: Cointelegraph Markets Pro

Flow Dapper Lab’s (FLOW’s) peak tweet volume came late on July 10 (red circle in the graph) in response to a highly successful week that the asset had, more than doubling its price from $9 to over $18.

A high VORTECS™ score that FLOW received some 50 hours earlier indicated that in the past, such rallies unfolded in several rounds and that historical precedent suggested a possibility of the second leg. Sure enough, the price kept climbing even after the wave of tweets began to recede, eventually hitting $21.20

These examples demonstrate that, while an onslaught of tweets alone is not always a harbinger of an impending rally, spotting abnormal Twitter activity early on can lead to a profitable trade. It can be especially useful when combined with other metrics and a robust understanding of the coin-specific context.

Disclaimer. Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risk including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial advisor before making financial decisions. Full terms and conditions.