Cryptocurrency Analysis: Leveraging the Power of CFDs, Charts and Trends

Unbeknownst to many cryptocurrency traders, the trading fees associated with this contrarian financial asset are significantly higher than they are on equities. Many exchanges levy a markup on the prevailing price of digital currencies like BTC, ETH, LTC, and XRP, and flat fees depending on the order size. The fee disparities between equities and crypto have not deterred traders and investors from dipping their feet into this potentially lucrative marketplace. Of all the cryptocurrencies on the market, Bitcoin retains its dominance both in terms of market capitalization, and tradability. Recent developments vis-a-vis blockchain technology adoption in the world’s second-largest economy – China – have boosted demand for BTC, and this is resonating in crypto markets.

There appears to be consensus among crypto enthusiasts, blockchain aficionados, and industry leaders that Bitcoin is on an upswing, based on logarithmic charts and price movements since inception in 2011. Various analysts posit that the $6,500 benchmark is the current support line. Heading into November 2019, the BTC price chart reflects substantial gains over the past 1 year, with gains of 44.58% year-on-year (October 31, 2018 ($6310.17) – October 31, 2019 ($9273.88)) or $2812.89 in nominal appreciation.

It is expected that Bitcoin will halve in May 2020, causing a spike in the price of this cryptocurrency. Given the November 2019 high of over $10,000, the halving event which is due in Q2, 2020 may exceed multi-year highs. The robust recovery of BTC in Q4 2019 has been fuelled by short-term surging demand on cryptocurrency exchanges and trading platforms. In terms of seasonal performance, Bitcoin tends to rally in November 75% of the time since November 2011. In November 2018, the cryptocurrency fell spectacularly, dropping 37%, although to be fair the digital currency market was faring poorly overall.

The Short-Term Bulls are Back with Bitcoin

Charts present interesting trends for analysis, with moving averages reflecting strong bullish sentiment with BTC. For example, the 50-day moving average of Bitcoin is $8,807.43, while the 200-day moving average is $9,036.19. At the prevailing price (October 31, 2019) of $9273.88, BTC is substantially higher than both short and long-term MAs, supporting the case for bullish sentiment. Trading brokerages across the board are seeing rising levels of interest in call options for BTC, both in derivative trading instruments like CFDs, and online purchases of BTC. It appears that the Chinese government is responsible for renewed interest in digital currencies, thanks to an announcement that a government-financed cryptocurrency will be released. Given its price, traders tend to derive little benefit from actual outright purchases of BTC, with the objective of holding and selling when prices appreciate.

 

The preferred option for many traders is the leveraged option with CFDs at reputable brokerages like Plus500, and others. When trading a contract for difference, less red tape is needed to facilitate the trade, and profits are possible whether prices rise or fall. Since no crypto wallets are required and no actual cryptocurrency is purchased – the derivatives instrument simply mirrors the price movements of the underlying instrument. When engaging in crypto trading with Plus500, this broker provides 1:2 leverage. Simple buy or sell options are presented in the form of contracts, making it easier for casual traders. As the leading digital currency, Bitcoin maintains 67% dominance in a market populated by over 3,000 cryptocurrencies across 20,900 markets. While an overall market capitalization of $247 billion, Bitcoin makes up $167 billion of that total.

The BTC Price Downswing Contrasts with Upswing in Google Trends

According to Bloomberg cryptocurrency writer Vildana Hajric, the trendlines indicate that the ‘Long term trend line suggests the downswing isn’t over yet’. The technical indicators on charts, notably the DVAN indicators reveal bearish long-term trend lines for Bitcoin. If the cryptocurrency’s pricing behavior follows these trends and the algorithm line remains below the baseline, bearish sentiment will prevail. If the lines reverse, then a rebound could occur.  It is worth pointing out that search engine results for Bitcoin have spiked in recent months with the greatest spike in search volumes evident in countries like Brazil, South Africa, Nigeria, and Ghana. While blockchain technology continues to enjoy tremendous interest among tech aficionados, Bitcoin is generating the most interest on search engines.

 

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