Earlier this week, bitcoin saw its price drop nearly 12% in a single day, taking it below the $6,000 mark and breaking a longstanding support just under said mark. The day after, bitcoin hit a new yearly low under $5,500. The dip may be a profitable opportunity, according to one chart watcher.
As first reported by MarketWatch, Twitter user OddStats revealed that, throughout bitcoin’s history, large two-day sell-offs are usually followed by short rallies that can be profitable.
Bitcoin $BTCUSD is down -11.9% in the past 2 days.— OddStats (@OddStats) November 15, 2018
Here's a chart showing every time in the past two years where it has dropped at least that much in exactly 2 days.
A lot of bottoms in there. pic.twitter.com/Bcna5sv72M
Using the Twitter users’ analysis it’s possible to see that in some cases it could’ve been extremely profitable to buy the dip, as long as it dropped over 10% in two days. The last time it occurred, at the end of March, BTC dropped roughly 14%, to about $6,840.
Those who bought the dip then would’ve seen their coins go up a whopping 46% in the next few weeks, as the flagship cryptocurrency then surged to nearly $10,000. As MarketWatch points out, in early February, the strategy would’ve been profitable as well.
At the time, BTC fell over 24.5% in said time period, but quickly recovered as in the next two weeks the cryptocurrency jumped roughly 72%. While in hindsight the strategy looks profitable, some of the microblogging website’s users have pointed out it would be hard to time the market, and that the data may not be representative.
Nevertheless, bitcoiners have seemingly been buying the recent dip. Data from the popular cryptocurrency exchange Bitfinex shows the number of long contracts surged from about 23,700 to roughly 26,700 in a few days.
As MarketWatch points out, the outstanding long interest is currently at its highest level since October 11. The two-day sell-off strategy, however, may have its flaws.
Late last year, when bitcoin hit its all-time high close to $19,000, the criteria were met on December 19-20. Buying the cryptocurrency then would’ve set traders down a further 20%, as the cryptocurrency kept on dipping.