January Review: Analyzing Cryptos and DGTX Performance

Author: Dave Reiter Date: 01 Feb 2019

Unfortunately, the cryptocurrency price performance at the end of 2018 has spilled over into 2019. Sorry to say, but the crypto bear market continues! However, as investors, we must remember that generating the final bottom in a bear market is a process. It doesn’t magically occur just because we’re in a new calendar year.

Performance Results for January

Let’s examine a few signs that verify that a final bear market bottom has occurred. First, let’s briefly review the performance results for January.

[caption id="attachment_3178" align="aligncenter" width="722"]crypto results for January Crypto Results for January[/caption]

As you can see from the table, the entire cryptocurrency asset class continued to struggle in January (with the exception of Litecoin). The table includes the top 10 coins and tokens based on volume, as reported by CoinMarketCap. For reference, DGTX has also been added to the mix.

All cryptocurrencies finished the month in negative territory, still searching for a bottom. Of course, it’s very difficult to pinpoint the final low in a bear market. In fact, it’s almost impossible.

However, there are a few indicators we can use in order to help us determine when an asset class has potentially reached its final selling climax. These indicators are certainly not perfect. Nevertheless, they do provide some helpful information.

How to Spot a Bear Market Bottom

The “classic” definition of a bear market is lower lows and lower highs. Each low is followed by an even lower low. Each rally attempt falls short of the previous one.

Currently, Bitcoin (BTC) is in a classic bear market--just check the below Chart number 1.

[caption id="attachment_3180" align="aligncenter" width="1080"]BTCUSD-35 Chart 1[/caption]

During the past 12 months, each Bitcoin advance has been unable to exceed the level of the previous advance. The first sign of a bear market bottom will occur when BTC can penetrate the two previous market lows, which would be $6,568.

Now, please examine Chart number 2.

[caption id="attachment_3182" align="aligncenter" width="1080"]BTCUSD-38 Chart 2[/caption]

A close above $6,568 would definitely be a bullish sign. At the very least, BTC needs to close above $6,568. In the meantime, the path of least resistance is to the downside. Another sign of a possible bear market bottom occurs when BTC closes above its 100-day moving average (MA).

Chart number 3 displays Bitcoin’s 100-day MA over the course of the past nine months.

[caption id="attachment_3184" align="aligncenter" width="1080"]BTCUSD-39 Chart 3[/caption]

As you can see, BTC has been below the moving average over 90% of the time. For a few days in late-July 2018, BTC penetrated its moving average. This turned out to be a “false breakout,” as Bitcoin was unable to stay above the moving average.

The current 100-day MA is $4,993. A close above $4,993 would indicate a possible reversal from bearish to bullish.

Many conservative investors will wait for a market to generate a new 52-week high until they’re willing to admit that a bear market has ended. In the case of BTC, the price must exceed $10,022 in order to record a new 52-week high.

The Best Indicator of a Bear Market Bottom

Arguably, the best indicator for spotting a bear market bottom is known as the “golden cross.” It is a very popular indicator within the technical analyst community. However, the golden cross requires a great deal of patience on the part of the investor because it occurs very infrequently.

What Is the Golden Cross?

It is a moving average crossover. More specifically, the golden cross occurs when the 50-day moving average moves above the 200-day moving average. Additionally, both moving averages must be trending higher when the crossover occurs.

Take a look at chart number 4 below.

[caption id="attachment_3186" align="aligncenter" width="1080"]BTCUSD-37 Chart 4[/caption]

This chart contains 12 months of BTC price action. It also displays the 50-day MA and the 200-day MA. As you can see, there have been no golden cross buy signals during the past 12 months.

You will notice that the moving averages crossed over in May 2018. However, the 200-day MA was trending down. Therefore, this was an invalid signal.

The golden cross is one of the most accurate and reliable indicators for forecasting a bear market bottom. However, it does require extreme patience. Currently, the golden cross is not even close to generating a bear market bottom in Bitcoin.

Important Numbers to Watch for DGTX

Unfortunately, DGTX has been unable to escape the crypto bear market. The token suffered a decline of 46.1% during the month of January. Despite the brutal drop, however, DGTX is still 231% above its ICO price from January 2018.

Please review the following paragraph from my article on October 29, 2018:

In terms of important support levels, it’s very important for DGTX to remain above .0679. A drop below .0679 would cause DGTX to lose its positive momentum, which could encourage traders to liquidate their positions, thus applying more selling pressure to DGTX. Therefore, from a technical perspective, DGTX needs to stay above .0679.

When this article was released, DGTX was trading @ .1285. A few days later, the token fell below .0679, which ushered in a bear market. Why is this such an important number?

Because it represented a major support level back in October 2018. Therefore, .0679 has now become a major resistance level, as DGTX tries to recover from its own bear market. A weekly close above .0679 would signify the end of the bear market.

Personal Observations

Nobody enjoys a bear market. However, bear markets are simply part of the life cycle of an asset class. In fact, bear markets are actually healthy because they remove the speculative excesses from the previous bull market.

The cryptocurrency asset class has experienced three bear market cycles since 2009. Currently, the asset class is in the middle of its fourth bear market. Eventually, the decline will end and a new bullish phase will begin.

Unfortunately, nobody knows precisely when the next bull market will begin. The best course of action is to follow the indicators listed above.

In terms of DGTX crypto prices, I’m watching .0679. A weekly close above .0679 would indicate to me that DGTX could be in the early phases of a new exciting move to the upside.

Full Disclosure: I own DGTX.

Digitex Futures writers and/or guest authors may or may not have a vested interest in the Digitex Futures project and/or other businesses mentioned throughout the site. None of the content on Digitex Futures is investment advice nor is it a replacement for advice from a certified financial planner.