The use of universal mathematical laws in trading is not unique. These laws work not only in the entire universe and thus everywhere on earth, but also in the psychology and subconscious of humans. That's why they can be used to find the peaks of new cycles...like Bitcoin.
Mathematics, game theory, golden ratio, Fibonacci sequence, Fibonacci retracement, Fibonacci golden spiral, the universal law of nature.
Moving averages, the psychology of crowd behaviour, business cycles, the halving of miners' rewards, Bitcoin price.
All these terms have something in common. They are interrelated and they interact. Some are used in trading, others in photography and art in general, in architecture, in the natural sciences, and so on. They are built upon the universal law of nature, its laws that cannot be changed.
Before we get to the tools of exploring the bitcoin peak and bottom in the long run, let's explain some important terms.
Golden Ratio = φ= 1 : 1,618 = 0,618
Ideal proportions of photographs, paintings, sculptures, architecture. People are looking for a golden ratio subconsciously because it is in this ratio that works best for the eye. The best-known example is the Eiffel Tower, the navel on the human body is also in golden ratio, check it out yourself.
It is an infinite sequence of natural numbers, where the next number is the sum of the two previous ones.
Fibonacci numbers are: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, etc.
It is also interesting that the share of two consecutive members is always close to the value of the golden ratio, ie 1,618.
Here we already touch on the concepts known from technical analysis. Retracement according to Leonardo Fibonacci is important ratios obtained from the Fibonacci sequence. They are important supports and resistances in trading.
The most important ratios are 0,382 and 0,618
π from mathematics is the ratio of the circumference of the circle to its diameter. The value of Pi is 3,14.
Bitcoin Price Calculation with Golden Ratio Multiplier
Let's go to the interesting part. Apply these numbers to the Bitcoin price.
Since Bitcoin is more like a technology that is adopted exponentially than the stock market, it needs to be viewed as such. It is a decentralized form of money, which will be limited in quantity and for which the price increases just in line with the increase in use.
Mathematical structures and calculations can be observed even in the relatively short history of Bitcoin, for this gift from Satoshi has been with us for just over 10 years. Thanks to mathematical calculations, the peaks of the following market cycles can be revealed, as they have done so in the past.
Moving average of 350 days
The Moving Average (or MA) bitcoin price of 350 days is historically one of the most important. When the price is below this average, we are in the bear market. On the other hand, a price above 350 D MA indicates a predominance of bulls.
Moving average x Golden ratio
When we multiply the 350-day moving average (350DMA) by the specific numbers at the beginning of this article, we get the following levels. You can verify that these levels have also served as important supports and resistances in the past. Let's start with the Golden Ratio as the most important level.
Moving average x Fibonacci sequence numbers
It will be even more interesting if we substitute the lines given by a multiple of 3500 DMA numbers from the Fibonacci sequence, ie 2, 3, 5, 8, 13, 21.
When you look at the chart, you will notice that in each of the previous bull markets the price bounced off the lower level of the Fibonacci sequence.
350 DMA x 21 = 2011 peak
350 DMA x 13 = 2013 peak
350 DMA x 8 = 2014 peak
350 DMA x 5 = 2017 peak
350 DMA x 3 = 2021 peak?
350 DMA x 2 = 2025 peak??
Use in trading
We know that Bitcoin is undergoing multi-year cycles due to halving the rewards of miners, as well as exaggerated optimism (FOMO) and pessimism (FUD). The 350 DMA appears to be particularly relevant to these market cycles, also due to the consideration of market psychology and crowd behaviour.
As with other indicators, the Golden Ratio Multiplier (the original name by Philip Swift) must not be used alone. It should offer the chance to improve your risk management.
An example is a previous cycle. If someone bought Bitcoin when breaking through 350 DMA and then took part of the profit at x1.6, x2 and x3, it would be a decent investment strategy.
Ideally, however, it could be sold at the very top of the market when the price touched 350 DMA x5.
Indicators that can act as supports are shown in grey. In contrast to the above, 350 DMA is divided by Fibonacci sequence numbers.
As long as the peaks of the Bitcoin market cycle continue to follow this strategy or system, the next peak of the Bitcoin market cycle could be the three times the price of 350 DMA (purple line).
Pi and its use in finding the next Bitcoin ATH
You will get this great tool to find the next peak of Bitcoin, when you combine 111-day moving average with 350 DMA x2 in the graph.
When 111 DMA rises above 350D MA x2, the price of Bitcoin will peak in its market cycle. This has always happened in the last three cycles, with an accuracy of + - 3 days!
And why exactly 350 and 111? When you divide these two numbers, you get 3,153, the number very close to Pi (3,142).
So, in the next bull market and especially in the parabolic growth of Bitcoin, watch this level.
Surely, we have just 3 cycles to measure and put to the statistics, that is not the best amount for decent results. This doesn’t mean that this will happen exactly for 100%, as nothing in trading is for sure. But it’s not a bad strategy to consider this at least.
The Golden Ratio Multiplier will be a useful investment tool in the upcoming Bitcoin market cycle for identifying profit areas. When the price is close to multiples of x1.6, x2 and x3, there can be found ideal exit points for your investment. Of course, the distribution is subject to your risk management.
The peak should touch the level of 3x 350 DMA. If you also use the Pi indicator, you can find the peak of the current Bitcoin cycle.
Very fascinating about all of this is an evidence of how the adoption of Bitcoins and cryptocurrencies is guided by mathematical patterns that occur everywhere in nature and throughout the universe.
If you want to embed these tools in your TradingView, here I offer you instructions for their implementation in the free version - here.
Past price behavior cannot be automatically applied to the future. A lot of predictions of the renowned traders come across this lesson.
However, it is good to be aware of these price behavior patterns and should be applied in your strategy. Everything is necessary to form your own opinion.
On the other hand, the more these calculations and indicators are known, the more likely the future will look different than Philip Swift's mathematical formulas.
But there may be something about that, what do you think?!
Source: The Golden Ratio Multiplier by Philip Swift
Photo source: Pixabay, Wikipedia
Graph source: TradingView
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