E Crypto Trading Strategy In A Volatile Market

Volatility in the cryptocurrency market is also caused by sporadic crypto whale activity. Crypto whales are high net worth investors and institutional investors that buy and sell cryptocurrencies. When they take a position on a given currency like bitcoin, prices tend to experience huge swings within a short period. As such, it is important to watch the activity of crypto whales on relevant platforms. 

Another thing that tends to cause volatility in cryptocurrencies like bitcoin is the hash rate. The correlation between bitcoin hash rate and bitcoin price is reported to be above 90% since 2018. When the hash rate goes up, the bitcoin price goes up. As such, this also can be a good item to follow when trading cryptocurrencies.

Chart via Woobull.

As demonstrated in the chart above, the price of bitcoin has followed a similar path to the hash rate over the last two years.

Technical Indicators for trading crypto volatility

Once you have identified potential items that could affect the price of a given cryptocurrency, the next thing is to focus on the technical aspect of the market. To effectively execute a crypto trading strategy, you need to consider the best volatility tracking indicators in the market.

Average True Range (ATR) and Bollinger Bands at work

This indicator measures volatility relating to price gaps or limits moves. It does not point to where the price could be heading next, but rather shows the level of volatility in the market. It is best used in conjunction with another volatility indicator, Bollinger bands.

Take for instance the price of bitcoin in the chart above. The pioneer cryptocurrency appears to have retained a consistent upward movement over the last three days. It has remained above the median Bollinger band over the period and now is pinned closer to the upper Bollinger band.

Down below, the ATR has remained well below 100. It is currently positioned at the 80th percentile, which is below average. Between May 9th and 12th, bitcoin volatility traded within the range of the 200th percentile. The higher the reading, the higher the volatility.

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Disclosure: The material appearing on this article is based on data and information from sources I believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor does ...

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Michele Grant 5 months ago Member's comment

I am not a fan of #cryptocurrency for precisely this reason. It enables criminals and. Additionally it can be hacked (anyone who says it can't is kidding themselves) and then you have no FDIC insurance, or any other recourse as it can not be tracked.

I am fine with digital currently which is regulated and protected, but I've never heard valid arguments by honest people on why we specifically need a cryptocurrency.

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Michele Grant 5 months ago Member's comment

Exactly. It's untraceable with no paper trail. I recently read about an entire town's computer system was hacked - no 911, etc. They were forced to may over $600,000 in ransom money and they perpetrators got away as a result.