BTCUSD has started off 2021 in strong form, and investors anticipate its upward trajectory to continue. Any regulations which interfere with decentralisation and blockchain technology could see investors express pessimism towards this pair.
BTCUSD is highly correlated to the US Dollar, so any news about its economic or political climate could also have a dramatic effect on its value. Any strategies used for forex trading can easily be applied when trading crypto CFDs.
Technical Analysis
Technical analysis is often dismissed as irrelevant when trading cryptocurrency markets like Bitcoin (BTC/USD). However, this couldn’t be further from the truth.
Cryptocurrency charts are an indispensable asset for traders and investors. They allow traders and investors to track price changes over time while also offering indicators to better assess market sentiment.
2021 has been an exciting year for BTCUSD, beginning with institutional money flooding into the market from major companies such as Tesla and MicroStrategy Incorporated. Furthermore, regulatory developments like COVID-19 lockdown and Chinese restrictions impacted Bitcoin prices significantly.
As mentioned above, Bitcoin halving happened in May 2020 which further reduced supply and drove its price higher, helping BTCUSD climb above $42,000 before quickly retreating back towards $30,000.
Fundamental Analysis
BTCUSD pairs represent the value of one Bitcoin against that of the US Dollar, making the latter susceptible to news regarding either currency – this includes interest rate decisions by the Federal Reserve which has direct bearing on USD prices.
Investor sentiment may also change depending on regulatory announcements that could impact the crypto sector or macroeconomic indicators affecting fiat currencies such as USD. For instance, higher inflation rates or central bank policy changes could prompt investors to turn toward alternative investment vehicles like Bitcoin.
Bitcoin’s intrinsic value can be estimated using models like the stock-to-flow model. This tool can help identify trading opportunities when an asset’s intrinsic value falls below its market price or exceeds it (undervalued or overvalued). Furthermore, MVRV index provides an efficient means to measure aggregate value holdings by investors and can be used as a measure to detect overvaluation or undervaluation.
News Impact
News related to Bitcoin BTCUSD and other digital currencies is one of the primary drivers influencing their price movements. Positive developments regarding regulation could propel its price upward, while bad press can force it lower.
As one of the earliest cryptocurrencies, Bitcoin has garnered both supporters and critics. While enthusiasts praise it as an innovative, fair, and equitable monetary system, opponents warn of its role in criminal activities, and call for its prohibition.
Institutional money has been the driving force of the Bitcoin market in 2021. Companies such as Tesla have invested heavily in cryptocurrency, drawing more capital into this space.
Negative regulatory developments have cast a pall over the cryptocurrency industry. China’s crackdown on cryptocurrencies severely reduced mining infrastructure and prices; and US Treasury Secretary Janet Yellen’s warning about cryptocurrency investments dampened investor enthusiasm – all contributing to push BTCUSD lower this week.
Trading Strategy
Utilizing a straightforward trading strategy is key to long-term success as a Bitcoin trader. Doing so allows you to avoid getting emotionally attached to either winning or losing trades and focus on learning from past mistakes while refining your process going forward.
One effective method to do this is by studying the On Balance Volume (OBV) indicator. This shows how much money is coming in and out of an instrument; if its movement increases, this indicates more demand for that asset and should push its price higher.
Another strategy is dollar-cost averaging, in which an amount is invested periodically into Bitcoin to reduce risk and take advantage of long-term price trends. Dollar-cost averaging is also used as a method of consistent profit-making with reduced transaction fees; and some traders even employ news-based trading to anticipate and trade with any changes in price direction.
