Bitcoin and other assets often develop support and resistance around the Fibonacci level, either through extensions or retracement. The ratios are based on the Fibonacci sequence associated with the golden ratio.
Since the top cryptocurrency is so tied to math, the golden ratio could provide clues as to where Bitcoin is in its latest market cycle and whether it has hit a low.
Cryptocurrency and Math: More Than Just Code and Geometric Shapes
The Bitcoin code is based entirely on math, its distribution protocol is also embedded in math and pretty much everything else. The scarce supply of 21 million BTC is halved every four years, and the sum of the event is often an imbalance of supply and demand in favor of a price increase.
Even chart patterns and technical indicators are little more than math – manually drawn geometric shapes and statistics represented by graphical overlays and oscillators.
Related reading | Fibonacci Day: How to Trade Crypto Using Math
But could math be used to find Bitcoin highs and lows? One of the most accurate tools for determining the top of any market cycle is called the pi cycle indicator and it is based on the mathematical constant. And according to one trader, the golden ratio is the way to find every bitcoin bottom on the way up during the bull market.
The crypto asset has historically retraced to the 1.618 Fibonacci ratio | Source: BTCUSD on TradingView.com
How the golden ratio could act as a bitcoin low before new highs
After fully recovering to and above the Fibonacci ratio of 1.0, Bitcoin breaks the 1.618 gold ratio, only to retest it later, according to the pseudonymous analyst. A re-test has resulted in the last major correction before the last bullish impulse that pushes the cryptocurrency to its real cycle high.
Other math tools have named the Top cycle, as mentioned above. However, the creator of the tool says the crossover network to give the signal was so narrow that it leaves room for another cycle high a few months later.
Related reading | Mathematical Mystery: Why Did the Bitcoin Rally Stop at the Golden Ratio?
Bitcoin price is trying to hold closer to $ 40,000 after plummeting to $ 30,000 and one of the worst monthly sell-offs in history. But that sell-off went straight to the golden ratio, as cryptocurrency has done during recent market cycles, and each time it has been the downside.
The burgeoning digital asset has not only recaptured highs, it also grew another 500% from its lows. As we now know, math is rarely wrong when it comes to cryptocurrency, and another similar percentage increase would bring the Bitcoin price well over $ 100,000 per coin.
Featured image from iStock Photos, Charts from TradingView.com