Cryptocurrency owners will no doubt be relieved and delighted that the market is going through a turnaround and green arrows are showing for the major coins. Most significantly for some experts, Bitcoin’s rise to above $7,000 on 17th July, gaining $600 in 30 minutes, highlighted the possibility of the start of a strong bull run.
Of course, there are always those who urge caution when optimism seems to be getting too much of the upper hand, but according to Coindesk, if you look at Bitcoin over a longer time frame there is reason to be cautiously optimistic, as a politician might say.
Coindesk also points to three tools investors use to analyse the markets in order to establish whether a trend has staying power.
Exponential Moving Averages (EMA)
An EMA provides insights into the asking bid and the momentum of a trend. They can be used to confirm or deny a trend change by analyzing the position of the EMA in relation to the current price. It involves use of the Fibonacci number 55, and for example, from May 11 to July 16, the 55 EMA for bitcoin was above the price acting as a barrier or resistance to any major moves past $6,860. However, since 17th July, the EMA has fallen below the current price, indicating a significant breakout, at least for the mid-term.
More of that Fibonacci sequence that traders use to identify major resistance or support. What you are looking for in an extensions and retracement chart are any major moves above the neutral Fibonacci extension at 0.5 as these would help to confirm the bullish view of the market.
Traders also look at trading volume and they will be looking at the total volume of Bitcoin that changed hands in a 24-hour period. On 17th July, Bitcoin volume reached a three-month high, and doubled the volume traded on 16th July. As volume increases, the price strengthens, because there are more buy/sell opportunities and greater liquidity. Keep a sharp eye on the volume as it is one of the best indicators for determining the strength of a particular move in relation to the amount traded.