Happy new year to all of my readers, I hope you have all had a fantastic holiday break.
Unfortunately your Christmas and New Year has been accompanied by a rather large correction in the crypto markets, but as with all things, this too shall pass. Hopefully 2018 will be an even better year for crypto than 2017 was.
I have high hopes for this year, as adoption has significantly increased, altcoins with impressive use cases are on the rise (Ether, Dash, XRP, etc.) and an increasing amount of businesses are starting to accept crypto as payment as well as increase their use of cryptocurrencies in back-end applications.
In light of this, it is my aim as a wealth manager to educate as many people as possible in South Africa (and abroad) on how to invest in cryptocurrencies in a responsible manner. This is a totally new asset class, which carries substantial risk and as a result, spectacular upside potential. By design, cryptos seek to put the power back in the hands of the people and demystify the investment process. However, I would argue that this goal is still far off. Cryptocurrencies and all things related are confusing to the first time investor. My aim is to write a series of articles explaining the basics of a wide range of crypto-related topics.
My first topic will be understanding Moving Averages, but more about this further down.
On to the daily analysis.
Over the last few days BTC has been trading in a range of decreasing volatility. The 50 day moving average and the 8 day exponential moving average have been providing support and resistance respectively. Currently price is trading at $13 400. As you can see in the chart, higher lows are constantly being formed, even though lower highs are being formed too. This is what technical analysts call a symmetrical triangle, thus we will be closely watching for a breakout, with an upside price target of $16 000. The downside target, if the breakout is negative the price target would be $11 000 (0.618 fibb level).
Altcoins seem to be making a comeback over the last few days. Ripple (XRP) has been leading the charge. As I have mentioned on previous occasions, it seems to me that XRP thrives when Bitcoin is in a bear market. Other large-cap altcoins which are doing well are Ethereum, Dash, IOTA, EOS, NEO and Stellar.
Understanding Technical Analysis - Moving Averages
A moving average is simply a trend line which represents the average of price over a calculated time period. In plain English what that means is that a price average from a candle is calculated and plotted onto a chart and multiple data points are plotted to form a line. Time frame, such as 50, means that the last 50 candles are taken into account. The time frame of your chart/candles is crucial here. If you are working on a 1 day chart, then price candles each represent 1 day and thus the moving average is calculated daily. This means that a MA 50 is a 50 day moving average.
This allows you to reduce the noise from normal price action and start to see what trends are forming. Multiple moving averages can be used to gain more resolution into the price trends. Short term moving averages follow price action more closely than long term MA’s. Exponential moving averages (EMA) allocate more weight to recent candles, thus tracking price more closely than simple moving averages (MA).
Further reading of Moving Averages here.
I come from a background in biology and have attained a masters degree in science from the University of Stellenbosch, after which I worked for a number of years in the Biotech industry. During this time I started studying economics and realized that I could make a difference in individual lives by coupling my skills and expertise with my extroverted personality. I then decided to make the move into the investment world and have not looked back since.