It's been a while I wrote a financial post. I was checking my Leofinance feed earlier and realized that last I wrote anything remotely financial was more than 2 months back. That is quite strange when I look back, as there was a time, not too long ago, that I would write mostly financial, chart and trading related stuff. It is not that I have stopped trading (well lately I call myself an occasional trader), and also it is not that I do not like trading or find financial stuff less appealing. It is to the contrary. Rather, a lot of the discussion happens off chain in various discord servers (which I enjoy as much as the on-chain conversation). One conversation triggered this post:
Wide-Eyed Neo-Trader: and it is now proven beyond a shadow of doubt bhai, even if it is an artficial pump, TA works.. no doubt
Seasoned Cynical Doubter: i do not agree
Wide-Eyed Neo-Trader: TA works sensei, that dude named Baba Fat showed it to me 5 mins before the pump!
Seasoned Cynical Doubter: a pump was eminent we all knew, don't need TA for it. I even had orders set for it before i have gone to sleep! But yeah I never thought $1 was possible. I had orders at 8490.
Eternal Questionaire: what is TA?
No, it is no vodoo, and no, its not magic, and yes, there are millions of articles, books, webpages, YouTube videos written on Technical Analysis (most of it crap!), so why I want to write something more and add to the pile of crap? Because I can! It's my blog! LOL. Nah, that's not it! Couple of communities I am posting this, a few individuals asked me from time-to-time and I just thought we will have some fun together.
What are they talking about?
Well the recent "PUMP" of hive off course! I hate that word pump, I will just call it rally in this post, which is the traditional word in financial market and it means rise of price.
Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.
Above is the accepted definition of TA. This is one of the branches of analysis to 'price' a security, the other being 'fundamental analysis' which is mostly relevant for stocks and companies where one tries to find a fair value of a 'business' based on its balance sheets. Both technical and fundamental analysis are accepted form of financial analysis by SEC (Securities and Exchange Commission) in the United States, and similar governing bodies internationally. Whether they 'work' or not, is the question I am willing to address. But the first point is to establish that they both exists!
That chart above is for Hive. We all know that it is a token and not a centralized company. As a stakeholders it is ours. It is a decentralized currency and without any government control. We all know that very well, but the reason I say this is still there are people here, some quite experienced, who doesn't know what some of these means. So, I urge folks to research on decentralization and this article is not about that.
Just because Hive is not a corporation (?) it is difficult to assign any value to it. Therefore, hive as a whole doesn't have a balance sheet (not for all activities anyways). Without that it is very difficult to value various businesses and individual entities that constitute hive. Therefore, it is nearly impossible to apply fundamental analysis to hive or any cryptocurrencies for the matter (also most of them are NOT securities, at least I think they don't want to be!).
So with fundamental analysis out, we are just left with Technical Analysis. This is the only tool we have, to do any kind of price analysis for a token like Hive (yeah sure, we can study the market cap and other accepted tokenomics show in crypto)
Hive was hard-forked from steem in March 2020. Pandemic was just starting, and whole world was just beginning to lock down and working from home became a norm and not an anomoly or a perk. I think many of us who were already entrained on this ecosystem were immensely benefitted from not just from the earning, but just to connect with people, without the irritation of concentional social media like facebook. So I am immensely thankful to the ecosystem.
With that out of the way, let me say this simply, and it is coming from a person who is looking at charts most of his adult life, that daily chart is not good looking :) Yeah, its our kid, we love her, but she is not the best looking one. Nothing wrong with that, it is what it is!
$1 is a psychological level for any crypto, (let us not talk about supply and marketcap and outstanding token etc, we all know that, and if not you can research). Point is we have rarely visited that level. So, whenever we go there, and we have been there only 3 times for minutes, within the last 17 months; people get very excited, and rightly so.
Can TA predict price?
For a single trade? NO. That is the short answer and it is a fact.
What it can do though, is discuss a probility of a particular price action to happen by using a large number of trades. Based on that it typically show a directional bias based on herd mentality. That is all TA can do. So TA can predict price in future with say 60% certainty, if certain assumptions are met over a 'large' number of trades. That 60% is an arbitrary number, it can be 55 or 65, but as long as it is higher than 50%, the user, YOU, have an edge. Actually I can prove that even below 50%, with trading discipline, one can come out profitable by using TA over a large number of trade consistently.
Is it easy to practice in action? NO.
Is it easy to show and teach? YES!! :)
Are there many people out there who is willing to teach you? Hell YES! For a small fee! Or a subscription service!
My blog isn't one :) As I am no Baba Fat!
Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.
Charts are created in Tradingview.com, which is a free service.