Decreasing Bitcoin (BTC) trade volume = pending price correction?
I am not a technical analysis subscriber but some chart review for Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH) shows some interesting traits about the recent crypto bull market. Baron Rothschild is credited with saying to, “Buy when there is blood in the streets. Even if that blood is your own.” He made his fortune and built an empire after Napolean’s loss at Waterloo. More recent perhaps the best investor of the modern market Warren Buffet has said, “You pay a very steep price for a stock market with a cheery consensus.” Recently in all cryptocoins there has been very little blood and plenty of cheery outlooks.
For those of us in this game for a few years there have been several peaks and valleys with long periods of low level prices for the major coins. Below is a chart for Litecoin (LTC). Litecoin is a good market historian for altcoins as it has nearly been on the market as long at Bitcoin and until recently tracked along with Bitcoin through the ups and downs.
What we see marked by blue arrows is a Litecoin price with very clear peaks but generally trending with The BTC:LTC price until July 2017 when Litecoin price increased but not as much as Bitcoin causing the ratio to decrease despite the increase in price. The same pattern is seen with other coins like Ethereum (ETH) which better demonstrates the split between the BTC:ETH ratio dropping from 0.08 BTC:ETH to 0.04 BTC:ETH.
More interesting is the seeming correlation between trading volume and share price of Bitcoin. The below chart shows previous Bitcoin peak pricing and at the same time marks peak volume. The only anomaly is the launch of Bitcoin Gold (BTG) causing a buying opportunity that quickly corrected. The volume is hard to break out in a 5 year chart going back to Bitcoin near the beginning. It should be obvious though that as volume increases we see price increase and when volume decreases we see price decrease. Wall street has been around much longer and I did not generate charts for periods to compare if we see high volume during declines like Black Monday. More interesting is a Bitcoin chart for the last 7 days showing a decreasing trend in Volume for Bitcoin trades.
In this case we mark the chart at the recent high when Bitcoin reached momentarily to $8000 per coin following the run-up from $5600 during the Bitcoin Gold launch. This is the anomaly I mentioned earlier as we did see a peak in volume during a downturn which I suspect is similar to what happens on Wallstreet during a sell off. At the peak marked with blue arrow we see Bitcoin holding value in a nice channel while volume has started a steady decrease marked with red arroiw. This decrease only represents a day and a half and bears watching to see if it continues. This could be a sign of decrease volume leads to decrease price.
Here we see the BTC:LTC reversing trend with the spike in volume and the price of Litecoin increasing through the increase and decrease in volume. It is an interesting set of patterns which I am positive a technical analysis expert has a series of complicated names for. For me at this point I was cross eyed after looking at so many charts.
The only certain point is the ratio of other coins to Bitcoin has diverged. Nobody can predict when a correction will occur but it has diverged far from the short historical tracking that any bad news for Bitcoin may lead to a selloff and a return to the norms.
None of this is meant as a recommendation for buying or selling. I have been hobby mining since 2013 starting with Litecoins using GPUs. Along the way I have seen highs and lows. I have sold at highs and tried to hold through the lows selling equipment and buying equipment to stay involved. The above trends represent a first in my 4 years in the game and one of the rare times I have paid attention to charting. Make your own interpretations before any trading. My amateur interpretation seems to indicate either a run up in altcoin pricing, a decrease in Bitcoin pricing or a combination of both to bring the trend of BTC:altcoin back in line with historical norms. Now, if I only knew when I could call it and maybe make a name for myself like Jim Cramer and Black Monday.