Bitcoin: Confidence Bands

11 בינו׳ 2021

Purpose of this Script

This script is designed to show regions of positive and negative overextension for Bitcoin, where price is expected to either reverse long-term or at least shorter-term, using custom price loops. The idea is that one can be highly confident that Bitcoin's price stays within the Confidence Bands, especially when looking at weekly closes. It might be wise to reduce exposure to Bitcoin when price gets very near to the red band, and vice versa for an approach of the blue band. Of course this constitutes no financial advice, and one should always consider all available information for making trading decisions.

Settings

This indicator should only be used:

- with the default inputs (but of course feel free to play around a bit for testing purposes)
- on the weekly (W) time frame
- and for the BraveNewCoin Liquid Index for Bitcoin (BNC:BLX).

Otherwise the intended functionality cannot be guaranteed.

Access

For access please contact me via DM on TradingView or on Twitter (linked on my TradingView profile and in my signature).

14 ביולי 2021

הערות שחרור

Added Accumulation Bands that can be used during the cycle accumulation phase to identify regions of over- and underextension. The accumulation phase is here defined as starting from the absolute cycle bottom and ending at the next Bitcoin halving. Outside this defined market phase the accumulation bands get increasingly inefficient as stronger impulses and crashes occur during bullmarket and bearmarket respectively, leading to frequent breaches of those bands. For bull- and bearmarkets the classic Confidence Bands should be used.

The image below shows the three hitherto existing accumulation phases for Bitcoin marked with blue semi-transparent boxes, and the corresponding price touches of the yellow and cyan Accumulation Bands. Note that in the third accumulation phase the March 2020 black swan liquidity crisis happened, which led to a breach of the lower Accumulation Band down to the lower Confidence Band.

https://www.tradingview.com/x/PZPFtXIL/

Note that the Accumulation Bands are hidden from the chart by default when you apply the indicator to your chart, but can be activated in the Input Settings menu.

Also the Resolution parameter was added, which should always be kept on weekly time frame in the Input Settings menu. With this, the Confidence Bands can correctly be observed on the daily (and other) time frames.