Timing the Crypto Markets: How to Spot XRP and Other Altcoins at Bottom

If traders had a crystal ball, their biggest wish would be knowing how to buy XRP at the bottom. Especially true in crypto, where the mantra remains: “Wen moon?” Translation: “Are we finally at the bottom?”

First, a heads up: some of the technical analysis tools and methods discussed here might differ from conventional wisdom. Why? Because, just like any other field, trading theories and best practices evolve. It can take years for these updated practices to trickle down from the pros to retail traders. Sometimes, even the pros lag behind in adopting these changes!

For this piece, we’ll dissect the anatomy of a market bottom using XRP, one of the most widely followed cryptocurrencies.

First Things First

News is anecdotal.

That’s a polite way to say, “news doesn’t matter.” If you ever chase professional certifications like the CMT (Chartered Market Technician) or CFTe (Certified Financial Technician), you’ll dive into works like “Behavioral Investing” by James Montier, which tackles the effect of news on markets.

The TL;DR? News only matters if the price moves. If price doesn’t react meaningfully, the news is irrelevant. People simply look to the news as an explanation or a reason for something that happened.

If we want to buy XRP at the bottom, there’s several tools that can help identify and time it correctly. The two tools I’m going to focus on is the RSI and Stocktwits’ social sentiment data.

RSI: It’s About Context, Not Blind Levels

If you want to buy XRP at the bottom, the RSI can help. Heads up: you’ve probably been using RSI incorrectly – or, at least, not as efficiently as you could. Don’t feel bad, though. The way professionals interpret RSI shifted nearly 20 years ago… but again, even pros sometimes take ages to adapt.

The RSI (Relative Strength Index) is among the most familiar and utilized indicators among traders.

In 1978, J. Welles Wilder introduced the RSI. Back then, it was revolutionary. Why? Because RSI thrives in ranging markets, exactly what investors experienced during Wilder’s time:

DJIA Monthly Chart, Source: Tradingview

Updated RSI Use

In 2008, Connie Brown – arguably one of the world’s greatest living analysts and traders – transformed how RSI is understood in her book, Technical Analysis for the Trading Professional (mandatory reading for certifications like CMT and CFTe).

Without going into the nitty gritty, the RSI should now be viewed as something that is either in a bull market or a bear market. And while each instrument and timeframe is slightly different, the typical OB (overbought) and OS (oversold) levels are:

Bull Market:

• OB 1 – 80
• OB 2 – 90
• OS 1 – 50
• OS 2 – 40

Bear Market:

• OB 1 – 65
• OB 2 – 55
• OS 1 – 30
• OS 2 – 20

Case in point: XRP’s daily chart from May 2019 to June 2020

May 2019 – June 2020 XRPUSD Daily Chart, Source: Tradingview

The RSI level 65, in particular during this timeframe, acted as a relatively consistent source of resistance, while 30 and 20 acted as support.

But how can you tell if RSI is bullish or bearish? Simple – overlay these levels, and whichever aligns better with recent movements, that’s it.

Looking at XRP’s weekly chart now, my interpretation is bullish since XRP respects the OS level at 50 as support.

XRPUSD Weekly Chart, Source: Tradingview

Stocktwits Social Sentiment: A Cheat Code?

Stocktwits’ social sentiment data is another powerful tool when trying to buy XRP at the bottom. Stocktwits captures insights exclusively from traders and investors – no random chatter from general social media.

Here’s what I’ve found especially valuable:

• If message volume rises but sentiment stays flat or drops, I’m looking for bullish setups. People often talk about doing something before actually doing it.

November 2024 illustrates this perfectly:

• Week of October 27, 1014: Sentiment 24, Volume 30
• Next week: Sentiment drops to 22, Volume climbs slightly to 32

This sentiment/volume divergence typically signals upcoming bullish momentum.

XRP Sentiment Analysis. Source: Stocktwits

Recent XRP Sentiment Activity

Currently, there is an even more dramatic divergence:

• Message Volume (orange) flat/slightly up
• Sentiment tanking, despite XRP’s price trending higher

XRP Sentiment Analysis. Source: Stocktwits

Another key pattern: When price flattens and sentiment dips steadily, it indicates traders are late in recognizing market direction. For me, that’s not just a signal to hop on – it’s a signal to secure a prime seat before everyone else rushes in.

In short, identifying market bottoms isn’t about being first; it’s about understanding context, leveraging updated analysis methods, and decoding nuanced market sentiment. That’s the anatomy of a bottom—the XRP edition.

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