## Understanding the Bottom in the Cryptocurrency Market
Cryptocurrency investments have gradually gained celebrity in the last few years, spotlighting themselves as an unalterable asset class in the financial marketplace. However, these digital assets go through interminable fluctuations, forcing investors to question whether the cryptomarket has hit bottom. To examine if we have reached a nadir, we will focus on three significant charts.
### Evaluating Support & Resistance with Bitcoin’s Five-Year chart
Bitcoin, the poster-child cryptocurrency, serves as an excellent vantage point for understanding market moves. Examining its five-year chart assists us in identifying patterns of support and resistance, critical for predicting future trends. Historically, Bitcoin has demonstrated patterns of pullbacks. Each time, it rebounds with better stability and resilience, indicating potential support lines.
The chart projects periods of marked resistance, usually followed by a drop, signaling a period of consolidation, during which Bitcoin gathers the momentum for another climb. The aim is to discern whether these levels hold over time, thereby turning former resistances into new supports. If new supports emerge to establish a higher baseline, it will be a promising sign for those anticipating an uptrend in the cryptocurrency market.
### The Wall Street Cheat Sheet
This famous cheat sheet describes a typical cycle of a speculative bubble by plotting investors’ psychological state against the price. One key element is that the graph shows sheer panic phases when the market nosedives after a peak.
In relation to cryptocurrencies, this cheat sheet adequately captures the market moods of investors. The 2017-18 bull run in Bitcoin and the consequential crash mirrors the psychological journey. The current state could be between ‘depression’ and ‘disbelief.’ If the graph remains faithful to Bitcoin’s behavior, a new cycle of hope and optimism is likely on the horizon.
### The Macro Economic Cycle
Traditional markets also influence the performance of the cryptocurrency market. The cryptocurrency space shares an unexpectedly close-knit dynamic with macroeconomic bubbles and crashes. As the S&P 500 index displays, the cryptocurrency market mimicked the regular recessions and subsequent recoveries of conventional markets.
A sharp rise in both the charts unfurls during comparable periods. Despite the different nature of assets involved, this pattern discloses an interesting correlation between traditional and digital markets suggesting an economic interdependence. It’s worth noting that it’s a pattern, not a concrete rule, as sometimes both markets can function independently based on several factors.
These chart analyses can provide insight to navigate an unpredictable crypto-market. However, while indicators and charts can be instructive, the highly variable nature of the crypto market maintains a degree of unpredictability. Investors should proceed with caution by diversifying their portfolio and using these charts only as part of their broader risk management strategy.