Bitcoin Breaks Higher From Narrow Base. Next Leg Up?

Jul 13, 2023

IN TODAY’S REPORT

What we cover: Bitcoin’s 20-day range falls below 4.25%. Current conditions vs buy and hold. Worst trade comparison.

TODAY’S STATS

Bitcoin’s 20-Day Range Falls Below 4.25%

Threatening to close above the key 31,000 level for only the second time this year, Bitcoin’s basing action has continued in a narrow range all week even as it currently pumps higher intraday.

Today we look at the extended drop in Bitcoin’s closing range, more specifically what the 20-day range falling to below 4.25% means historically. We’ll examine all data and outcomes before comparing them to a simple buy and hold strategy. Let’s dive in!

`BITCOIN (BTC/USD). Daily Chart with 20-Day Range <= 4.25% with 365ma.`

Our range condition is simple, with two additional filter conditions which best describe the current market. Specifically, Bitcoin’s narrow ranging action takes place above its one-year moving average (365ma) which is also rising, indicating an improving market over the past 12 months.

QUERY SETUP CONDITIONS:

CONDITION 1: Bitcoin's 20-day closing range <= 4.25%
CONDITION 2: Bitcoin is above its 365-day moving average
CONDITION 3: Bitcoin's 365-day moving average is rising


ENTRY AND EXIT CONDITIONS:

1. ENTRY CONDITION: Enter long ("buy") at the open of the next daily candle
2. EXIT CONDITION: Exit ("sell") N-days later

`BITCOIN (BTC/USD). Average Trade Comparison, Current Conditions vs “Buy and Hold”`

Looking at hypothetical average trade results, both the current conditions and a buy and hold approach have historically produced modestly positive outcomes over the short-term (7 to 30 days).

Over intermediate to long-term hold times from 60 days to one year, hypothetical average trade results using current conditions beat the buy and hold results in every period but one, with increasingly impressive results.

But when we look under the hood at the single worst loss for current conditions compared to the same for buy and hold, the difference is stunning.

`BITCOIN (BTC/USD). Worst Trade Comparison, Current Conditions vs “Buy and Hold”`

Worst trade stats for Bitcoin’s current conditions using short-term hold times (7 to 30 days) have never exceeded -16.9%. Compared to buy and hold’s worst trade of -49.1% over the same window, the current conditions appear to have a dramatically lower risk exposure - something any experienced trader will appreciate.

Looking at all hold times, Bitcoin’s current setup has experienced lower worst trade stats nearly across the board, with buy and hold only beating it once (180 day hold).

In short, Bitcoin looks poised for a high base breakout, with a probability of only modest downside using 7 day through 90 day holds. With 31,000 once again in Bitcoin’s sights and the king crypto currently trading above it, we may be at the start of the next leg up. Let’s go.

THE TLDR

A Few Key Takeaways

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✔ Worst trade stats for Bitcoin’s current conditions using short-term hold times (7 to 30 days) have never exceeded -16.9%
✔ Compared to buy and hold’s worst trade of -49.1% over the same window, the current conditions appear to have a dramatically lower risk exposure
✔ With 31,000 once again in Bitcoin’s sights and the king crypto currently trading above it, we may be at the start of the next leg up.

peace_love_crypto

-DB

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