The Best Ways to Trade the Coming Crypto Market Bounce
In light of crypto prices plummeting at one point in time, we're going to see the crypto market bouncing back, the same way it did in the past following each crash. There are 3 key criteria to look for before an upcoming price recovery that every serious crypto trader needs to learn.
Earlier Bounces in the crypto market
The crypto market bounce off 2011: In 2011, when Bitcoin was at $32 and in a matter of 5 months dived back to $2, this was a 93 percent dive in price but recovered in the year to all new all time high (ATH).
Bear market 2014 to 2016: In 2013 the price of Bitcoin dived from $1.135 to $175. This is an 85 percent value drop in one month (December to January). This drop was partly triggered by the Mt Gox hack, where hackers got away with 850,000 Bitcoins.
The 2018 bear market: Still fresh for some crypto traders around this time, the value of Bitcoin dived from $19,640 in December 2017 to $3,185 in December 2018. This is a staggering 84% drop in value.
At the end of all three bear markets, Bitcoin bounced back and reached its new all-time high in months.
What is Bounce Trading?
In short, bounce trading involves buying a crypto asset when its price drops to a support level with the expectation that it will bounce back. This pattern happens after a decline in the price of a cryptocurrency.
3 Key Criteria to Look For a Crypto Market Bounce
The first thing to look for is the volume to confirm the bounce. Ultimately, the volume often reflects the cryptocurrency's price, which is why we need to look for bullish days with increased volume. That's a positive sign that the buyers have returned to the market.
The second thing to look for before a bounce is the overall market performance. For example, if Bitcoin's price is bouncing, check if Ethereum's price is following the same direction. Usually, BTC and ETH track each other's performance as they move in tandem most of the time. The only difference may be the actual magnitude of the rally.
Lastly, check the technical picture to see if the price is still within a range or how far out of the range the price has moved. If the market bounce happens within a multi-week trading range, then the price is more likely to remain trapped inside the previous range. However, if the crypto price has a strong move outside its previous range, there is a higher probability of a follow-through.
While no one knows with certainty what the markets will do next, these are only some key clues to watch so you can make a better assessment of whether this is a dead cat bounce or a recovery.
