 | I wrote a lot of analytical posts in 2022 on bottom indicators trying to gauge whether based on common bottom indicators, the bottom of Bitcoin was in. Half of the time my posts were mocked because technical analysis is frowned upon here. The most popular comments were:
To be honest, these posts always took me many hours to write, and I stopped writing them because of how often they were mocked. But I had a few beers today and feel courageous. So: Now we are halfway through 2023, let's analyze: How did the bottom indicators do? I will analyze 6 common ones (but skip some of the more technical ones, though the results would be similar). I took the price of Bitcoin at the time of writing ($30.9K). (1) 200 week moving average - 39% profit The Bitcoin 200 weekly moving average is a moving average over, well, the past 200 weeks. It has been an amazing level of support and a clear bear market bottom indicator. Bitcoin hit the 200 week moving average at $22K. Profit: 39%. (2) Pi Cycle indicator - 63% profit The Pi cycle indicator forecasts tops and bottoms for Bitcoin. It is based on two long-term moving averages: 471-day simple moving average and 150-day exponential moving average. The signal lights up when the latter falls below the former. On 13 July 2022, the Pi Cycle indicator flashed a buy signal. The price was $18.9K. Profit: 63%. (3) Bitcoin Rainbow Price Chart - 44% profit The rainbowchart uses a simple logarithmic growth curve to forecast the potential future price direction of Bitcoin. The lowest level is "basicalyl a fire sale" and that has marked the bottom in many years. It hit that lower band at a price of rougly $21.5k. Profit: 44%. (4) Hash Ribbons Indicator - 29% profit (first time) or 63% profit (second time) The Bitcoin Hash Ribbon indicator tries to identify periods where Bitcoin miners are in distress and may be capitulating. The assumption is that such periods can occur when the price of $BTC is at major lows, and may therefore present a good opportunity to buy the dip. It marked the first buy signal in August 2022 at around $24K. Profit: 29%. It flashed again later in January 2023 at around $19K. Profit: 63%. (5) Weekly RSI - 50% profit The relative strength index (RSI) reflects the strength in the market at a moment in time. In past bear markets, weekly RSI hit oversold levels on the weekly time frame at the low and then bounced. The same thing happened. RSI hit hit oversold at around $20.5K. Profit: 50%. (6) Monthly MACD - 55% profit The MACD is a trend-following indicator and can help gauge whether an asset is overbought or oversold. The MACD is displayed under the Bitcoin Monthly chart below. Every previous bear market when on the Monthly timeframe the trend shifted and the histogram had 'peaked' (dark red bars ended, lighter red bars started), the bear market bottom had already been in. This happened again in October 2022 at around $20K price. Profit: 55%. Conclusion Buying when these bottom indicators flashed is EXTREMELY lucrative. The average gains are 49%. None of the indicators perfectly identified the bottom as most flashed around the crash of Luna/3AC/Celsius. But they did a great job identifying good moments to buy, which is what they should be used for anyways. Perhaps we would benefit from a more open mind on data. These indicators worked very well in the past identifying good moments to buy and did so again. [link] [comments] |
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