PrimeXBT 101: How Both Bears and Bulls Can Profit on The Current Market
Bitcoin’s highly publicized meteoric rise and the overall crypto hype bubble in 2017 changed the crypto industry forever and cemented the emerging asset class as a serious financial asset that can be wildly profitable for investors and traders.
The exciting new financial technology brought in crowds of new investors and traders – many without any previous market experience – who were taken by surprise when values of Bitcoin and its altcoin cousins began falling substantially in 2018.
At this point, the hype had faded and the bubble was popping, leaving many investors and traders alike feeling burned. Shorting Bitcoin became all the rage, and the only way traders were able to protect the capital they invested during the previous’ year’s bull market.
Along the way, crypto investors became day and swing traders in hopes of becoming profitable in a falling market. Due to the popularity of spot exchanges like Coinbase, few traders realized they didn’t have to suffer through holding assets that were drastically losing value, and could instead open up short positions on Bitcoin and other crypto-assets and actually generate profits during a downtrend.
The Big Short and Bitcoin’s Bear Market
For investors in 2018, the crypto bear market was a long and painful period. But for traders, 2018 may have been the best opportunity for accumulating more Bitcoin. Throughout the year, Bitcoin price bounced back and forth between support and decreasingly lower highs, forming a chart pattern that crypto analysts refer to as a descending triangle.
Not only did each peak and trough inside the descending triangle provide traders with the opportunity to short each top, but the descending triangle also eventually broke down through support, causing Bitcoin to drop another 50% in value. Those that were in short positions actually profited substantially from such a large drop in Bitcoin price, while the rest of the market sat and watched in horror as Bitcoin set a new yearly low.
Sideways Bitcoin: Consolidation at Lows Before Bullish Breakout
At the start of 2019, Bitcoin price was trading in an extremely tight trading range between $3,100 and $4,000. With only $900 worth of price volatility, trading the asset stopped being profitable for anyone who wasn’t trading Bitcoin on leverage.
Bears continued to try to push Bitcoin price lower and lower, but bulls stepped in to prevent any additional lows from being set. The market was at a stalemate, and trading volume diminished as a result.
Parabolic Rally: Longing the Bitcoin Bottom For Major Profits
Once April 2019 hit, Bitcoin bulls took control back from bears, and pushed Bitcoin price up, causing it to break out of the consolidation range it was trading in and took off like a rocket ship on yet another parabolic rally.
From there, Bitcoin price broke through former bear market resistance at $6,000, then continued on its unstoppable ascent. Traders who had taken a long position at the bottom of Bitcoin price charts found themselves in enormous profit in no time at all.
Return to Consolidation: Where Does Bitcoin Go Next?
The rally began in early April, taking Bitcoin price above $4,000, and by June, Bitcoin price had not only broken back above $10,000, but it came close to breaching above $14,000 before it was rejected, representing an over $10,000 gain and returns of over 350% for those that were able to long the bottom.
After Bitcoin was rejected at $14,000, the crypto asset dropped back down to $10,000, and it has been ranging between the resistance and support levels ever since, consolidating once again.
Crypto analysts are in disagreement if Bitcoin has formed yet another descending triangle on its price charts, and is at risk of potentially breaking down much as it did during the bear market. Should Bitcoin price breakdown from the triangle, Bitcoin price could hit downside targets as low as $5,800, with more realistic targets ranging from $6,500 to $8,500 and everything in between.
But Bitcoin is said to be in a bull market, and descending triangles have a 53% chance of breaking upward, according to Bulkowski – renowned chart pattern expert. If Bitcoin price does indeed break up from the formation its consolidating in currently, it would realistically retest $14,000 where it was previously rejected. If it successfully breaks through there, the crypto asset could make another attempt at setting a new all-time high above the current high set back at the peak of the crypto hype bubble in 2017 – an all-time high of $20,000.
Because the market is torn as to which side Bitcoin price will break out to, the market has once again begun trading sideways in an extremely tight trading range. The reduced volatility usually turns into an explosive rice movement once resistance or support gives way, and a direction is chosen.
How Traders Can Profit Regardless of Trend Direction
Regardless of which direction Bitcoin chooses in the days ahead, it will be smart traders who have adapted to both rising and falling markets – or even sideways trading markets – who will be the most successful and profitable.
During the 2018 bear market, while investors sat back and watched their gains disappear, traders were able to use a platform like PrimeXBT to open short positions and earn profits from falling Bitcoin prices. Short positions allow traders to profit from falling markets by essentially betting against prices rising.
It might be difficult to believe that traders can even be profitable while prices are falling, however, but for example, if a trader had been able to open a short position at Bitcoin’s all-time high using 1 BTC on 100x leverage, it would have resulted in the trader earning $1,690,000, or an 8400% ROI.
After Bitcoin began trading sideways, and the downtrend came to a halt, traders were able to still profit using both long and short positions on 100x leverage. Leverage is defined as borrowed capital that’s used to greatly increase the potential return on a trade.
For example, during this sideways trend, Bitcoin price would sometimes fluctuate as little as 0.3% each day – a far cry from the 25% price swings that Bitcoin often demonstrates. Using 100x leverage, that 0.3% move would turn into a 30% price movement and generate 100 times the profit.
Once Bitcoin broke out into a bull market, traders were longing each drop in Bitcoin price, hoping to ride the powerful price movements into life-changing profits. Those that were able to take a 100x long position in Bitcoin around its bottom price at $3,100 would have turned the 350% gains into 35,000% profits.
Now that Bitcoin is chopping in a tight trading range once again, traders can take advantage of 100x leverage to keep the profits coming, all while preparing for the next major move in Bitcoin.
If Bitcoin is indeed in a bull market, a long position could be extremely profitable. However, if Bitcoin is still in a bear market, a short position will end up being the more profitable trade.
Traders using platforms such as PrimeXBT that offer both long and short positions simultaneously can open a position while opening an additional hedge position in case the trend moves opposite what is expected. Using such a strategy and proper risk management through carefully placed stop losses can ensure a trader’s risk is minimized but is in position for the greatest financial reward.
PrimeXBT: Tying It All Together With Advanced Trading Tools
There’s no denying that Bitcoin trading can be incredibly profitable, but this is only possible if the trading platform being used supports both long and short positions, and offers leverage among other important trading tools.
PrimeXBT features up to 100x leverage on Bitcoin and other popular crypto-assets such as Ethereum, Ripple. Litecoin, and EOS, and not only allows long and short positions, but the two can be opened simultaneously for strategies that include hedge positions.
In addition to providing all of the tools traders would need to profit in both rising and falling markets, and even tools to generate profits during sideways trading, PrimeXBT also offers a helpful mobile app, advanced order types, built-in charting software, and so much more to help traders be as profitable as possible.
PrimeXBT also offers forex currencies, commodities, stock indices, and more for unrivaled portfolio diversification opportunities, and will soon debut a massive peer-to-peer fund management module in partnership with Covesting.
By taking full advantage of all of the tools offered by PrimeXBT, it truly doesn’t matter if you are Bitcoin bull or bear, you can still profit from rising, falling, and even sideways markets with the right profitable trading strategies.
Coinbase is a digital currency exchange headquartered in San Francisco, California.