All price data were collected on Oct 04 18:00

BAKKT influence? BTC drops below the $9k mark on Sep 25

Expectations have not exactly met the hype Bakkt built since its launch of BTC futures on Sep 23. In fact, accusations of BTC’s price drop have been attributed to the event. BTC prices began dropping at 6pm on Sep 24, fluctuating between $9,300 — $9,600. The price dropped below the $9k mark at 2am, hitting $8,012. In just 3 hours, the delta was 18.2%, making it the biggest in 3 months. Gradual drops marked the newest low at $7,688, a point that was going up back in June. Using triangular convergence, the graph (Figure 2) shows a 1/3 shrink in the bullish market.

In the large triangular convergence interval, most buying positions were supported at $9,500 — $9,600. The selling pressure broke through and caused the market to trigger a large number of stop-selling sell orders, which in turn triggered panic selling. Given BitMEX can open 100x leveraged orders, there were as much as $708 million worth of long orders that had been forced to close (Figure 3). Trading leverages may increase profitability in the bull market, but it also loosens risk control for a number of investors. With this incident, these leverages became double-edged swords overnight, cutting off many overly optimistic investors.

Figure 1：BTC/USD (BitMEX) Recent Trend (3 hr intervals). Source: AIcoin

Figure 2：BTC/USD (BitMEX) Dropping below convergence (12 hr intervals). Source: AIcoin

Figure 3：BitMEX Sep 24~Sep 25 forced liquidations. Source: datamish.com

Short term adjustments & shortage of profitable signals

After BTC’s nosedive, BTC showed signs of short-term stabilization in the one-week support test. The price settled at $7,700 (Figure 4). However, growth was weak at the end of September as mainstream currencies such as Ethereum rebounded. Upper market was subjected to a resistance correction of $8,500. With the current market sentiment not yet digested, the monthly trend projects downward to resume fluctuations of previous weeks. In the past 7 days, Bitcoin ranked lower in the top ten currencies of the market value. With a lack of profitable signals, BTC’s fall has greatly affected the income of miners. If it loses support at $7,700, it may fall near $6,400. Meanwhile, EOS and ETH have been performing relatively well (Figure 5).

Figure 4：BTC/USD (BitMEX) Short-term adjustments (1 hr intervals). Source: AIcoin

Figure 5：Top 10 currency performances. Source: Tokenview

Market Outlook

The market shortly entered consolidation, suggesting that active investors can follow the sell high buy low approach for short-term profits. As for conservative investors, stay put. The breakthrough requires multiple challenges. The short-term advantage is on the short side. It is necessary to strictly control the position and avoid high-leverage and high-exposure operations, so as to avoid huge losses caused by turbulence. If investors are expecting BTC halving rewards in 2020, they could make early plans to buy in batches at the average price.

Bincentive’s selected strategies

Strategic profitability & quantitative advantages

Bitcoin features 24-hour uninterrupted trading. Quantitative trading amplifies this advantage through computerized market monitoring. When BTC’s nosedive occurred on Sep 25, observed in Figure 6, quantitative analysis would allow early entry, profiting via trend-type strategies and consolidating early September losses. The approach of bigger profits and smaller losses nets September in positive returns.

Figure 6：BTC/USD Quant strategy performance. Source: Multichart

Bincentive notes an outstanding performance in September from its listed strategy “Momentum_Close” with a return up to 7.1%. The strategy enters the market when the price breaks and the momentum indicator is strong. Due to the long strategic period, the strategy builds a strong resistance in consolidation periods. Similar strategies include “Momentum_Continuity” and “Momentum_Extremum”.

On another note, “EMA Breakout” made great profits in May. Although the strategy appeared weaker in July and August, the high volatility in September satisfied the conditions for winning, resulting in 2.8% returns.

The conservative combination strategy “P4 Strategy (Mix)” focuses on solid profitability, complementary contrarian logic, and spread losses during consolidation periods. It accurately attacks and reduces large fluctuations in profit and loss (maximum drawdown of 4%). There was also a 2.2% positive return in September.