My attempt to use technical indicators to determine if Bitcoin is being oversold or over bought.
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V tem članku I will attempt to use technical indicator(s) to determine if Bitcoin (BTC) is currently being over sold. If it is being oversold then this may be a sign to buy.
First, I collected data on Bitcoin (BTC) from year 2019 to 2021.
Next, I got some statistics about the data. From the image below, you can see I have about 527 days worth of data, and the average close price for BTC is about$20,994.82. BTC had a minimum close price of about $4,970.79 and a high close price of about $63,503.46 within this data set.
That’s all great, but of course this doesn’t tell me if the current price of BTC is over sold or not, but one would think that if BTC is currently at its highest price ($63,503.46) then it’s probably not oversold. Quite the opposite may be happening, it’s probably over bought at its highest price.
Next I wanted to take a look at the data visually to see if I can see any patterns that might suggest a good time to buy BTC. So, I created a candlestick chart to do this.
The pattern of the candlestick chart looks pretty random to me, but I wanted to get a closer look at the chart for more recent BTC prices. So, I decided to zoom in on the year 2021.
By zooming in on the chart, I think I may see a pattern (of course this could be completely made up). In the chart above I saw downward prices (marked in blue) followed by up swings in BTC prices (marked in green). This makes me think that maybe we will soon have another upward swing in the price of BTC since the current trend seems to be downward for many days.
Next, I wanted to take a look at the Fibonacci chart and the volume of BTC.
BTC seems to be approximately following the Fibonacci retracement levels with resistance around the second level (yellow retracement level) and support around the third level (green retracement level) between the dates of Jan 2021 and March 2021. The price of BTC has dropped below two levels from its peak price. This is a good indication to buy BTC as most people wouldn’t expect the price to drop below the next two levels. If that did happen then the price of BTC would be below $30,000 which are price levels that we have not seen for BTC since 2020.
Also, from the chart above it seems that the volume and price are both falling slightly. It is actually very hard to tell that the volume is decreasing.
By using the MACD indicator and a simple strategy, I wanted to know when is a good time to buy and sell the asset.
From the chart above, I used both the MACD indicator and the Fibonacci chart to create buy and sell signals. The strategy seems to be doing well except for the last buy signal, which indicated to buy BTC. Although the price of BTC did go up from when the strategy told me to buy, the strategy never told me when to sell and the price dropped significantly. The price at which this strategy told me to buy was around $50,000. Had I bought and held at that price, then I would currently be down in my investment.
Now, I want to know what’s my daily expected return while holding this asset. This could help me to determine if I even want to hold onto an asset like BTC.
The average or daily expected return is about 0.3898%. That’s not bad, but it’s not great either at least this asset seems to be giving positive daily returns….so far. This is nice to know in case I invest in BTC and the price drops further. I can then hope (key word here is hope) that I would still get a positive return on my investment.
From the chart above, I can see that BTC had a day where the price dropped about 35% compared to the rest of the daily returns. It looks like that was around March 2020 (around the start of the 2020 pandemic shut down). If you had bought into BTC then, you would be profitable within BTC today (5/22/2021).
I don’t see any significant drops like that within the past few days, but I do however see some significant drops in the past few days a little over 10%, so this could be an indication to buy BTC.
So, now I want to know what’s the trend of the BTC price and is it over bought or over sold.
By using the 30 day Simple Moving Average (SMA), I can see that the trend is downward, and by using the Relative Strength Index (RSI), I can see that the asset seems to be over sold. This can be seen on the image above where the RSI crosses below both the green and yellow line. That’s a strong indication that BTC is over sold, if it hits the red line, then that’s an even stronger signal showing that the asset is over sold. So, this may be a good indication to buy BTC at its current price or lower. The RSI level is at about 18.21 and crossed below the 20 RSI level.
So is BTC being over sold? I would say probably. It seems like now would be a decent time to invest, but this doesn’t mean that the price of BTC can’t drop more and again this isn’t financial advice so be sure to do your own research before investing in anything.
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