The cryptocurrency market is volatile, and it is not uncommon to see reports about a sudden spike in prices or a nosedive in value. This volatility causes sudden sell-off or buying in the market. Users either panic sell when they think a market bottom is approaching or panic buy to stock up when they think a market boom is close. However, this analysis isn’t always right and often leads to loss. Therefore, it is important to understand the market cycle to avoid trading with sentiments. You must know when the market is rising and when it is approaching the bottom.
Therefore, this article aims to inform you about a market bottom in cryptocurrency and guide you on identifying a market bottom of a market cycle. This would ensure that you make informed decisions in the market. And as information is often the difference between gain and loss in crypto, this would go a long way to guide you when crypto trading. Let us begin by highlighting what a market bottom means.
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What is a Market Bottom?
According to Investopedia, a market bottom can be referred to as the lowest price traded or published by financial assets, security or commodity within a specific time frame. On the other hand, Nasdaq defines a market bottom as the price level at which an asset’s price begins to move after trending downward. So, in simple terms, it is the lowest price point of a prevailing downtrend of assets, after which it is believed that the price trends upwards. Understanding a market bottom would become a great strategy to place trades and trade crypto signals.
What is a Market Cycle?
It is important to explain a market cycle before we talk about how to spot a market bottom in a market cycle. Let us explain what a market cycle means. A market cycle is the period between a high and a low in crypto and encompasses the stages in-between the high and low periods. The time frame of the cycle varies depending on several factors.
Guidelines to Spot a Market Bottom
Now that you understand the concept of market bottom and market cycle, the following information will explain to you how best to identify a market bottom. The general perception is that targeting the top and bottom of a market cycle is deadly and that crypto trading during the trend in-between is preferable. But spotting a market bottom is not as dangerous as people make it seem.
Using a VIX
It would help if you first tried to get clues on how volatile the market is at that very moment. For crypto, a direct way to measure volatility is using the BitVol Index, which is an alternative to the CBOE VIX Index of the stock market. With BitVol, you can determine real-time market sentiment, which is critical to the market bottom.
A Big Market Travel Day
This could also be an indicator of a market bottom. A big market travel day refers to extreme volatility within a single trading day. In this instance, the price rapidly moves up and down in a volatility pattern. It is an indicator that the market is close to a turning point. Now, if the market was in a bearish trend, this could mean s turn in direction.
Although the big market travel day doesn’t say which direction the market is turning toward, it does indicate an imminent change in trend through the volatility patterns.
Cryptocurrency sectors refer to groups of tokens or coins with similar or the same function. Crypto tokens tailored toward gaming can be classified as being in the gaming sector. So, there are several sectors, such as the privacy sector, gaming sector, digital voting sector, stablecoin sector, and others.
In cryptocurrency, the general market and specific crypto sectors do not always move in the same direction. So, one way to identify a market bottom is to check the price of your coin against the price of others within the same sector. This will give you a sense of where the market is in that particular market cycle.
Another way to identify a market bottom is by simply listening to what people are saying. Often time, the crowd goes with sentiment in the market, and panic sells when there is a nose dive. But when everyone seems to be selling off, some people go against the general sentiment because when the noise of selling calms, the market often bottoms and changes direction.
In summary, there is no one way to spot an exact market bottom. Experts often say that predicting the exact price of a bottom in a market cycle is almost impossible. However, combining the guidelines above would jointly help you identify the coming of a market bottom.
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