How can you predict these movements?

by James · February 22, 2023

Bitcoin has been on the move.

Getty

I’m still bearish on bitcoin, but the facts say otherwise. As I wrote back in January, it’s going to go up or down, and it’s going to be strong. Well, we had it, and it went bull not bear. The bottom line is that investing and trading are all about probabilities, and if you know there’s a strong move coming and you don’t know the direction, you’re still good if you want to play because you can jump on that move.

I didn’t because after trading for a decade or two, my brain and stomach lining tell me that there is more happiness to be found in investing and long-term positioning than riding the short-term tiger.

So how do you know if a big move is ahead of you?

The answer is under certain circumstances.

Let me show you what led me to that prediction and how it affects the current situation.

Here is the diagram:

The Bitcoin chart can be used to predict big moves

Credit: ADVFN

So the key is volatility. No matter what anyone tells you, volatility is noise and noise in markets is a function of uncertainty.

High volatility means that the market as a whole does not know the price. Low volatility means that almost everyone agrees that this is the right price for now.

When volatility is low, calm equilibrium is the order of the day, but when that price is breached, something happens, and in markets prone to bursts of volatility, that means a big move:

The simple takeaway is when you see a noticeable and sustained compression of volatility, it ends with a move. Likewise, when volatility is high, there is a battle over the future outcome.

You can see this compression in the boom/bubble cycle of 2018:

shows compressed volatility

Credit: ADVFN

For the bulls, they can point to this and say that the latest rally is a clear repeat of the previous cycle’s bottom. Why not?

Right now, it’s just a conversation: Can crypto survive the rolling onslaught of regulators “Operation Crypto Chokepoint?” If so, we will have another cycle soon enough; if not, crypto will be crippled for years to come. However, the death of crypto in the US is not yet destiny, and if it is, Asia will accelerate crypto to strategically take the US into its economic core. While readers of this probably know and America’s nomenclature most likely does not, crypto is a revolutionary computing technology, and to discard it undermines the global competitiveness that is the key to economic and political preeminence. Superpowers have fallen on that sword many times, let’s hope the broken US system is still smart enough not to add itself to that list of fallen empires.

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I am the founder and former CEO of the stock and investment website ADVFN and General Partner of Ylem Capital ([email protected]). I am a prolific financial writer; I wrote a stock column for Wired – which described me as a “Market Maven” – and am a regular columnist for a number of financial publications around the world. I have written for titles including: Working Money, Active Trader, SFO and Technical Analysis of Stocks & Commodities in the US and have written for pretty much every UK .national newspaper. In 2018 I won Journalist of the Year in the Business Market Commentary category in the State Street UK Institutional Press Awards. Over the past few years, I have become a financial thriller writer and have written the best-selling investment how-to book: 101 ways to pick stock market winners. Find me here on American Amazon. You may also have seen me on CNBC, CNN, SKY, Business News Network, BBC and Al Jazeera giving my views on the markets.