Crypto-Currencies: Bitcoin, Litecoin and Ethereum

Crypto-currencies are now becoming more mainstream and I am starting coverage of these instruments in this blog on a weekly basis. There are quite a few of these currencies, but I plan to cover just three: Bitcoin, Litecoin and Ethereum. The point of the weekly posts is to show the crowd psychology behind the price movement and to eventually find profitable trades among these instruments. With the CBOE now providing access to crypto-currencies and with the ETF BTC, these instruments are now easily tradeable.

It is no secret that when a bubble comes into awareness in society, it is like a moth to a flame. The attraction is unstoppable. Easy money, or the perception of it, is part of the attraction. Needless to say, when my family starts asking questions about Bitcoin, it is a sign that the bubble may be close to popping. So I begin this initial post with the intent of documenting the price patterns and finding profitable short-term trades. Needless to say, the easy money has already been made and there is a substantial risk with the 5-day ATR (average true range) of Bitcoin averaging 3441 handles.

Bitcoin is a digital decentralized currency distributed worldwide. The $BTCUSD represents the price of Bitcoin priced in US Dollars. With the decline in the USD coming in 2018, this pair should continue to see an upside. For now, I am just posting a basic chart with a few ratios below and will discuss my observations about these instruments over the next few weeks.

The rallies here are clearly 3rd waves, I see no divergence yet as the crowd is still piling into the trade. BTCUSD are in a bollinger band ride between the 2nd and 3rd standard deviation bands, which calls for higher prices. My plan is to stand aside for now and wait for a decent short setup.

The ratios below show the value of Bitcoin compared to Litecoin and Ethereum. The ratios show that Bitcoin is overvalued compared to its counterparts which argue for a rally in both Litecoin and Ethereum.

Litecoin is a peer-to-peer digital decentralized currency distributed worldwide and Ethereum is an open-source blockchain-based currency. Both are prices in relationship to US Dollars. Both the Litecoin and Ethereum daily charts are below. Ethereum is the tamest of the three and is staying between the middle and upper bollingers for now. In the coming weeks, I am expecting the crowd to pile in and prices to rise to complete a third wave.

I am expecting an increase in crowd following to culminate in a big 3rd wave peak which we have yet seen in all three. I am expecting the culmination of the third wave followed by a 23% pullback and a final advance next year which should lead to a very large correction in the sector. I will be posting more charts with more observations next week.

Written by:

Stan Nabozny

Stan is a 20 year retail trading veteran, CTA (Commodity Trading Advisor) and Co-Founder of The Art of Chart. His specialties include using futures and options to trade Energies, Precious Metals, Equities, Currencies, Bonds, Softs, Grains and other commodities. Stan believes that Risk Management and Trader Psychology are more important that technical analysis and spends his time teaching and coaching other traders on these topics. Stan uses various trading systems and technical analysis approaches that integrate time and price in his work. See his latest articles here and

10th Dec 2017

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