Cryptocurrency prices have surged over the last year due to their underlying technology enabling fast and cheap cross-border transactions.
Cryptocurrencies as speculative assets have the potential to intensify flight-to-quality or flight-to-safety events and thus threaten financial stability (Gubareva et al. 2022). We analyze their tail spillover effects with gold, oil and equity volatility indices.
Fibonacci Analysis
Fibonacci analysis can assist traders in spotting low-risk entries missed by more impulsive market players, although this method may not always work perfectly – the golden ratio and Fibonacci sequence may not always provide reliable predictions of Bitcoin booms and busts.
Fibonacci levels or retracement percentages are key points on a price chart, calculated by dividing each number in the series by another two places higher. Common levels include 61.8%, 23.6% and 38.2%.
Traders frequently utilize Fibonacci levels as support and resistance. Furthermore, traders find them particularly useful when coupled with other forms of technical analysis – for instance Gartley patterns and Elliott wave theory often demonstrate that reversals tend to occur near particular Fibonacci levels – similarly trend lines and moving averages may also prove useful when combined with Fibonacci analysis. It’s important to keep in mind that no technical indicator can accurately predict future events – the key here is doing your research beforehand and never risk more money than you can afford.
Elliott Wave Analysis
Ralph Nelson Elliott first developed this method of market analysis during the 1930s. It provides insight into why markets move in certain patterns over time rather than trying to predict exact prices of future moves; instead it seeks to give traders an understanding of how markets may evolve over time.
Identification of various wave patterns and their characteristics, such as how impulsive waves consist of five waves while corrective ones only three, helps traders recognize potential trends or reversals in the market, which is essential for profitable trading.
Example: If a market reaches its peak, this might be classified as Wave 3. Following that peak is usually a pullback that takes prices back down towards their Fibonacci retracement levels – this analysis tool is essential when entering trades as it helps determine risk-reward ratio and target prices – especially useful when dealing with volatile assets like Bitcoin that experience extreme price volatility.
Moving Averages
Moving average is an indicator that adds the data points of financial securities over a specified time period and divides them by their number. Because it is lagging indicator, it may miss some price trends; additionally, its predictions often overshoot and undershoot; thus leading to inaccurate predictions.
The authors evaluate the accuracy of models using four statistical metrics: MSE, root mean square error (RMSE), mean absolute error (MAE), and mean relative error (MAPE). GBMs that use similar underlying data to the one in SS6 but with less training epochs perform best for SS5.
Ripple has an optimistic trend that could see it return to third position in the crypto market by 2028. Ripple attracts investors due to its various uses such as payment systems, banks and remittance services as well as its immunity from strict regulation.
RSI
RSI is an oscillator that uses momentum to detect trend changes. The default setting for 14 days. Additionally, other indicators can help identify when a trend has reversed itself.
For example, if an downtrend has been continuing and the Relative Strength Index (RSI) drops into the 30 area, this could signal that momentum may be building and that a reversal could soon follow. When this occurs, traders could look to buy security when it breaks above this area or short it when it falls beneath 30 level.
However, the RSI may give false signals and should always be used alongside other technical analysis tools. Furthermore, investors should bear in mind that it only looks at past price reversals and cannot provide exact forecasts as to when price reversals may happen; furthermore it can become misleading if overbought/oversold conditions continue for too long.
