Crypto is all the buzz these days, with new digital currencies constantly being developed and existing blockchains advancing their technology. For those who have been paying attention, it has become evident that the potential for this new burgeoning asset class has tremendous upside.
With the recent surge in popularity of cryptocurrencies, a new crypto investment technical index has emerged, the Crypto Risk Index (CRI) (updated hourly). This index was introduced by www.cryptomarketbuzz.com back in 2020 in order to provide investors with an indication of the risks associated with investing in digital currencies, giving investors and traders valuable insight into the technical analysis of the markets. The index is based on an analysis of the data and the technical indicators of the crypto markets, and has had a remarkable track record of predicting potential price swings of crypto assets.
In this blog post, we will dive deep into the Crypto Risk Index and find out how it was able to predict high probability of crypto market direction. We will also discuss some tips and tricks on how to better utilize the index in order to make smarter investment decisions.
www.cryptomarketbuzz.com is an online platform that provides up-to-date news and analysis of the global cryptocurrency markets. I explained in my previous blog that they are now updating their Crypto Risk Index for the top 5 crypto assets every hour. This means that investors and traders can stay on top of the ever-changing crypto markets and make more informed investment decisions.
The market crash of Nov 2022 sent the risk index into Low levels (as illustrated in the figure below for BTC risk index). In late October 2022, the risk index for BTC was around 75 in the High levels, indicating a high potential for price drop, which is exactly what happened in the following weeks. BTC price stayed in the $18K channel for the next 8 weeks, and then started surging in mid January 2023, with price getting to just over $22K and the Risk Index also getting into High levels. Over the last year, every time we had risks levels in High following a price surge, we saw price drops, as illustrated in the graph below. However, this time, the risk index has stayed High for the past three weeks, unlike previous times that it dropped immediately after the price surge.
For ETH, the price/risk actions follow the same patters, and over the past year, price surges always followed a period of Low risks, and risk levels got into High levels and then immediate price/risk level drops. We had Medium risk levels back in Dec 2022, when ETH price was in the $1.3K channel for a while, following a price surge in early Jan 2023 into $1.5K channel. One interesting pattern here is that, unlike previous times, even though the risk index has subsided slightly from 78 to 66, price has stayed almost the same (as shown in the chart below).
Currently, the market shows high level of risk and Bullish momentum (shown below for Jan 31, 2023).
Although predicting the price of Bitcoin is not an exact science, there are certain factors that can give investors insight into the direction of the markets. Using technical analysis and trend indicators, investors can gain a better understanding of the crypto markets and be better equipped to make more informed decisions. Additionally, staying up-to-date with news and developments in the space can also help investors anticipate market movements and make more informed investment decisions.
Based on the Risk Index of 73 (High), and historic patterns, there is a high likelihood of a price correction in the next few weeks. However, only time can tell us what will happen, and we will have to wait and see how the Risk Index will correlate with price actions.
Final thoughts …
Crypto investing can be highly lucrative, but it also comes with a number of risks. Without a proper risk management strategy in place, investors can suffer significant losses when the markets go against them. As always, my advice is to manage your risks, understand the crypto markets, read the news, understand the assets you are investing in, and have proper exit or HODL strategy before entering any investments.
Keep in mind, the information provided on this blog are for informational purposes only, and does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the blog’s content as such. You need to do your own research and understand the underlying volatility and legal and political aspects of cryptocurrency markets. Also, you need to consult your legal, financial and tax advisors before investing in cryptocurrencies. There are risks in cryptocurrency investments. Do your own research and invest wisely.
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