Chocolate Bitcoin and money

Bitcoin: Buy or Sell the Highs?

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Most traders view new highs one of two ways:

  1. Buy a market that’s performing better than ever!
  2. Sell a market at its greatest premium ever!

Last week, Small Stocks posted new highs for the last decade, natural gas did the same for the last decade, and Bitcoin blew out highs for the last several months to the tune of a 35% rise since September 29th.* So, should you buy or sell?

Highs in Stocks, Natural Gas, and Bitcoin

1014_smalls1.png

Source: Yahoo! Finance (https://finance.yahoo.com/) and dxFeed Index Services (https://indexit.dxfeed.com)

Bitcoin’s Price (Re)Action at Highs

How a market has historically traded at highs could help in deciding on a strategy once they’ve made new highs. Bitcoin poses an interesting trend, whereby it moves lower in the days following a high but extends much higher afterwards, on average.

Bitcoin’s Average Move After New High in 2021

Next Day

Next Week

Next Month

-$125

-$360

+$2,900

Source: Yahoo! Finance (https://finance.yahoo.com/) as of 10/7/21

This type of price action can pose an interesting contrarian play for traders in the short term and trend trade for those looking through a long-term lens. Though the jury’s out on the next month of movement, Bitcoin did in fact reverse after last week’s highs.


Bitcoin’s Price Risk at Highs

But averages aren’t guarantees. Contrarians and trend followers alike should assess the risk around these averages, which is thousands of dollars.

Bitcoin’s Standard Deviation After New High in 2021

Next Day

Next Week

Next Month

+/-$1,800

+/-$5,600

+/-$6,600

Source: Yahoo! Finance (https://finance.yahoo.com/) as of 10/7/21

The amount of risk doesn’t necessarily sterilize the edge that the averages might present, but, rather, it can be a reason to lessen your exposure to the edge.

Bitcoin is not lacking in the opportunity department, but it has only recently seen the arrival of smaller, more accessible products with Small Crypto futures.

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*Futures data from Yahoo! Finance (https://finance.yahoo.com/) and dxFeed (https://indexit.dxfeed.com) as of 10/7/21

© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. The information presented here is for illustrative purposes only, and is not intended to serve as investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Trading in options, futures, and ETFs is not suitable for all investors. The risk of loss in the trading of options, futures, and ETFs can be substantial. Trading in derivatives and other financial instruments involves risk.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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