Crypto’s “Hammer Candle”

The crypto market is enjoying a short-term resurgence due to news that Tesla will once again accept Bitcoin, as long as it can “green up” it’s mining process. An article I wrote a few short weeks ago looked at the state of the crypto market and I predicted that cryptocurrency as a whole lacked the broader sentiment to make an immediate recovery, much to the disapproval of the wider crypto community.

I was levelled with accusations of spreading FUD (fear, uncertainty & doubt) and that my predictions were nothing to do with the long-term future of cryptocurrency. Well, they were definitely partially right, my work said nothing disparaging about the long-term future of crypto. I merely warned retail investors not to “get leveraged to the tits” as WallStBets would say, in the wake of a monumental crash and make emotional / stupid decisions with their money.

Anyways, let’s take a look at Bitcoin’s recent “Hammer Candle”, which by the way has nothing to do with literal hammers or candles, rather it’s a technical indicator traders use to see whether or not an asset is likely to move upwards in price.

But first, let’s start lead into this with some advice from Martin Scorsese’s: The Wolf of Wall St.

The Beautiful Epistemology of Matthew McConaughey

We all remember the scene in Wolf of Wall St, where Jordan Belfort (Leo DiCaprio) an eager young stockbroker meets Mark Hanna (Matthew McConaughey) at the top of the Twin Towers.

It’s there that Hanna dishes out some epistemological wisdom:

“Number one rule of Wall Street. Nobody… and I don’t care if you’re Warren Buffet or if you’re Jimmy Buffet. Nobody knows if a stock is gonna go up, down, sideways or in fucking circles. Least of all, stockbrokers…”

Epistemology is the study of knowledge. At its core is one fundamental question: “How do we know that we know things?”. And the truth is, we don’t know with any degree of certainty about nearly everything in our lives.

All of our knowledge about the future is limited by our reliance on past information. Without a time machine or a new piece of technology that allows us to peer into the fabric of time itself we will forever remain in the dark about the conditions of our future.

The only areas where we can predict things with certainty lie in the realm of pure mathematics: geometry and the immutable laws of physics. We don’t even know if the sun will come up tomorrow, we just act as though it will because it always has. We rely so heavily on the nature of continuing patterns to shape our behaviour in the world, that when these patterns suddenly divert from their regular trajectory we get blindsided.

So, what does any of this have to with crypto? Well, if anything this philosophical preamble is a glorified insurance policy for my following predictions, and you should remember keep this in mind for whenever anyone tells you that a given asset is “definitely” going in a certain direction…

What is a “Hammer Candle” Indicator

Firstly, a candlestick chart is something investors use to see the opening & closing prices of a given asset. If it’s a red candlestick it means that the asset dropped in value of the course of that trading period, and if it’s green it meant that price went up.

Candlesticks show investors how much an asset changed in price over the course of the day. As you can see in the graph above candlesticks have these little lines sticking out of them called shadows. This shows where the price moved to throughout the day / time period an investor is looking at.

Now a hammer candle has to look something like this, this one is red but it’s even better if it’s green:

The crypto market has recently seen a set of positive hammer candles over the past few days. This shows us that there’s a potential short-term trend reversal underway.

Bitcoin’s Hammer Candle

On June 7th we saw one of the more promising technical indicators of a short-term trend reversal. Hammer candles must have a small body and long tail, it’s preferable that the candle is green because it shows that it closed higher than it opened, but the one pictured on the left has been followed by a real, week-long increase in prices.
Personally, this prompted me to immediately pick up some more small parcels of Bitcoin, Cardano, Basic Attention Token & Ethereum.

Technical Tools Are Just “Indicators”

Now, I’m not saying that this little candlestick in the broader crypto market has any earth-shattering significance, but in terms of the coming weeks it is a vital piece of information for retail traders looking to “time” the market. This hammer candle is just an indicator of short-term price movements, and cannot be used as a “sure thing” in the broader sense of investment.

This little candle, combined with the broader shift in market certainty regarding crypto, namely; El Salvador accepting Bitcoin as legal tender, Tesla confirming they will accept Bitcoin again in the future, strong movement of mining out of China towards North America provides enough immediately resolutions to the general FUD surrounding the recent crash for me to feel secure in picking up larger purchases of cryptocurrency.

Let me know your thoughts on this analysis in the comments. Obviously, all of this is my personal opinion and not professional financial advice. Always, always do your own research before choosing to invest your hard-earned money in the markets.

Source: https://medium.com/project-shekel/cryptos-hammer-candle-de68ab26fa64?source=rss——-8—————–cryptocurrency