Bitcoin is currently trading at $51,000. This is ~26% down from its 10 November high of 60,900. An astounding quarter of its value was wiped out in just under a month. It's also a 50% retracement from its July low (green horizontal). However, in terms of peak and trough analysis and despite its mammoth decline, BTCUSD has a higher trough followed by a higher peak. This is the definition of an uptrend.
Bitcoin's sharp pullback in terms of its market risk
Over 60 days:
- BTCUSD's 60-day beta is 40.8
- The SPX500's beta is 1
- Gold's 60-day beta is 0.19.
When we expand this to 12-months, BTCUSD's risk is still elevated:
- BTCUSD's 12-month beta is 8.4.
- The SPX500's beta is 1.
- Gold's 12-month beta is 0.01.
Bitcoin's risk profile is much higher than those for the SPX500 and Gold.
Past Performance: Past Performance is not an indicator of future results.
We consider two possible scenarios, acknowledging that these are only hypothetical. The first scenario considers the blue dashed trajectory. Here, BTCUSD charts a higher trough (HT?) at the 50% retracement and then follows through to chart the next higher peak (HP?) in the series. This would be the continuation of the weekly uptrend. The second scenario follows the red dashed lines. Here, BTCUSD does move up off of the current support (HT?) but lacks the demand necessary to chart a higher peak. As such, a lower peak (LP?) charts, before price drops to record a lower trough (LT?) This would result in a defined downtrend for the cryptocurrency. There is certainly scope for large gains in either scenario. However, with this comes large associated market risk.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.