Hello Onchain Edgeoors!
Ever puzzled over Bitcoin's fluctuating prices and wondered if there's a way to make sense of it?
You're not alone. Particularly in 2015, 2018, and 2020, we've seen Bitcoin reach very specific price levels.
Here's something interesting:
These price points correlate with very specific levels known as Fibonacci retracements.
While it might sound complex, these markers can help us predict where Bitcoin's price might go. (This can give you an unfair advantage on where to buy BTC for the next Bullrun)
In this newsletter, we will explore how you can use Fibonacci retracements to find the best prices to buy your favorite altcoin.
By the end, you'll better understand how to identify key buying points in the crypto market.
Enjoy!
Kierin | Onchain Edge
P.S. I suggest reading till the end for an interesting trade idea involving an altcoin recently listed on Coinbase for free, with an extremely low market cap of $34m.
What you need to know about Fibonacci Retracements
Fibonacci Retracements are a key tool for any crypto investor’s toolkit.
It doesn’t matter if you are a long-term investor only buying BTC or if you are an altcoin trader buying low-cap coins.
The Fibonacci works extremely well in both scenarios.
Let’s break it down:
The fib tool is a mathematical tool that displays potential support and resistance levels.
The fib levels reveal potential areas of support & resistance in advance.
Fib retracements help anticipate where pullbacks might find support.
It works because of psychology.
They work because they are a self-fulfilling prophecy; many traders and bots react at these levels.
Drawing a Fibonacci Retracement ✍️
You only need two data points: an asset's high and the low.
Levels are calculated by applying the fib retracement tool to the value difference between high and low.
These levels act as potential price inflection points.
When you are on tradingview, you need to select the tool that has 3 lines and looks like this:
Then, you select the trend low and drag the fib retracement to the trend high. (usually, I go from wick to wick.)
Key Fibonacci Levels 🔑
0.382: The normal pullback level during a bullish trend.
0.618: Often acts as a capitulation price level.
In crypto, altcoins can retrace much lower than the 0.618
If you've been following for a while, you might have seen me talk about "Golden Pocket 1" and "Golden Pocket 2". I have some special Fibonacci settings that I like to use for crypto.
Golden pocket 1 and golden pocket 2 levels.
These settings have worked really well for BTC, ETH, and altcoin trading. Here's the same monthly chart we used before. You can see how the golden pocket matches the chart perfectly.
Buying BTC at the .786 Fib Level was incredibly profitable
(Here are historical examples of the 2015,2018 and 2022 bear market.)
During the 2015 bear market (since $BTC increased so much in value), the price dropped quite a bit below the 0.786 level.
But still, the Golden Pocket 2 was an excellent buying opportunity.
Looking back at the 2018 bear market, we can observe a similar pattern. $BTC retraced to the 0.786 fib level as well. (slightly below it)
The $BTC correction in 2020 was a similar story. Even though the candle close was above the 0.786 limit, placing limit orders at those levels would have given you an excellent price.
On the monthly timeframe, BTC retraced to the 0.786 fib level during the 2022 bear market.
5 Actionable Steps to Get a 60% Better Price on Your Next Investment Using the Fibonacci Tool
Choose Your Coin:
You can select a coin based on the narrative that is currently hot as well as fundamentals.
Pro tip: Select a cryptocurrency available on major platforms like Binance or Coinbase. These are more accessible for retail investors and generally have more reliable data for analysis.
Analyze on Higher Timeframes:
Use higher timeframes like daily or 3-day charts on TradingView for a broader perspective. This helps understand the longer-term trends and reduces the noise from shorter-term fluctuations.
Draw the Fibonacci Retracement:
Identify the most recent significant high and low points on the price chart of your chosen coin. Use these points to draw the Fibonacci retracement levels, giving you key areas to watch for potential reversals or continuations in price.
Set Up Alerts in TradingView:
Use TradingView’s alert system to get notified when the price reaches key Fibonacci levels. This way, you don't have to monitor the market constantly.
Begin Dollar-Cost Averaging at Key Levels:
When you receive an alert that the price has reached a significant Fibonacci level, consider starting the dollar-cost average into the coin.
Bonus Trade Idea:
Arcblock is on Coinbase and has a relatively low market cap of $ 24 million. It’s following the decentralized identity narrative.
I marked out interesting price points for adding ABT in the chart below.
UPDATE (08 Feb 2024)
ABT ended up doing 432% after I shared it. I hope someone managed to get in!
Finally, here’s some interesting alpha:
I hope you enjoyed this newsletter.
Kierin | Onchain Edge
