Bitcoin Price Depth Charts – How to Predict Bitcoin Price Trends
Digital currency like Bitcoin hasn’t just exploded in value over the course of 2017. Instead, as we head into 2018, more people than ever are looking to buy Bitcoin thanks to greater public awareness and interest in digital currency.
Sadly, one of the worst things new to market traders and investors can do after signing up to a Bitcoin exchange, is buy Bitcoin without really knowing if the current Bitcoin value is stable, or if market corrections and pull-backs are just around the corner.
In short, people looking to buy Bitcoin (and other digital assets), need more than ever to familiarize themselves with how to read and understand things like cryptocurrency market depth charts, basic price charts, and Forex-like candlestick charts. Only this way, after all, can investors make more informed buying and selling decisions.
What is a Bitcoin Depth Chart?
Derived from data from live buying and selling orders, green lines like those on the GDAX depth chart below, correspond to Bitcoin buying orders (BIDs). Red lines, on the other hand, correspond to selling orders (ASKs).
To simplify what this means, a BID order is an automated Bitcoin purchase which will take place if the Bitcoin price reaches a predefined trigger point. Sell orders then are the opposite, namely due to the fact that automated Bitcoin selling will ensue as a predefined price is reached.
How Should New to Market Traders read Bitcoin depth Charts?
The easiest way for new traders to read depth charts is to think of green BID order values as representative of how much investment capital the current Bitcoin price needs to grow further. Flat and/or steady green BID order data means that the current Bitcoin price will likely increase incrementally over a set period of time. Sudden vertical ‘walls,’ however, represent the point at which several buying orders will be executed simultaneously and in doing so, (likely) see Bitcoin surge in value in the process.
Understanding Buying & Selling Walls
Vertical and steep lines in Bitcoin depth charts are indicative of how much investment capital coming into Bitcoin or leaving Bitcoin, would be needed to shift the current Bitcoin price forward or backward. This being the case, so-called ‘walls’ often represent advantageous buy-in opportunities, as well as worst case scenario selling points.
Should You be Learning How to use Depth Charts?
Depth charts can be good for novice traders who want to buy in just before a wall which they expect to result in significant digital currency price gains. Selling order walls, on the other hand, are usually only helpful for traders who hold BTC long-term and who are looking to set market exit points which will still see them exit the digital currency market with a substantial profit.
Of course, by far the most important thing to remember about depth charts, is that selling and buying wall positions can move minute by minute as the cryptocurrency market itself moves. This being the case, all traders should exercise caution and never trade more than they can realistically afford to lose.