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Bitcoin Choppiness Index Can Help Confirm Bottom

The choppiness index (CHOP) can be used to determine if the Bitcoin market has stabilized at a bottom and can also be tracked to confirm if a Bitcoin rally or downtrend is starting.

CHOP ranges from 0 to 100, with 0 representing directional movement, either upwards or downwards, and 100 representing oscillating movement around a steady price with no long-term movement in either direction, that is, sideways market movement. Essentially, the higher the CHOP, the more stable the average market price of Bitcoin.

If the CHOP exceeds 61.8 then the market is strongly sideways and if below 38.2 indicates the market is moving either up or down. Currently, using a one-day time interval, the CHOP for Bitcoin’s price relative to USD on tradingview.com has exceeded 61.8 as of 3 October 2018. This is a solid indication that the Bitcoin market has become quite stable, and could be a temporary bottom. The last time Bitcoin’s CHOP exceeded 61.8 on 20 September, Bitcoin rallied from USD 6,200 to USD 6,800.

Using a one-week time interval, Bitcoin’s CHOP rose to near 60 as of early August and has stayed there since then. The best way to use CHOP is to combine it with other market indicators. One very obvious market indicator is Bitcoin’s USD 5,800 support level. Since CHOP is showing stability and there is a solid support level at USD 5,800, it can be speculated that Bitcoin has hit its bottom and will eventually move upwards from this level.

If the CHOP starts decreasing significantly below 60, that indicates the market is becoming directional again, and since the price of Bitcoin is near its support level, that direction will probably be upwards.

 

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