Historical maximum (ATH) in cryptocurrency: what it is and how to use it

In anticipation of the Bitcoin halving and against the backdrop of the overall rise in the cryptocurrency market, there is a rise in the value of many coins and tokens. This situation is reminiscent of the events of November 2021, when Bitcoin reached a record high of $69,040.10. During periods of rapid growth and fear of missing out (FOMO), the market may again approach its previous peak values.

In the world of traditional finance (TradFi) this indicator is known as the historical maximum (ATH) and is a key indicator when assessing market sentiment. Let's figure out what ATH represents, how to apply it in trading, and what impact it has on the price dynamics of cryptocurrencies.

The Concept of ATH and Its Significance

ATH (All-Time High) – is the highest price or the maximum market capitalization of an asset in its entire history. This term applies to all types of assets, including stocks, commodities, and digital currencies. In the cryptocurrency space, ATH reflects the highest recorded price of a specific coin or token in the market.

It is important to remember that cryptocurrency prices are subject to constant fluctuations, so ATH only reflects a peak value at a specific moment in time. In addition to price, some analysts also track ATH market capitalization, which is calculated by multiplying the number of coins in circulation by their current value. This indicator can be updated even without a rise in the price of the coin, for example, when the total supply decreases due to coin burning.

Origin of the ATH indicator

When analyzing any asset, traders are interested in two key values: the current price and the all-time high (ATH). Comparing this data helps assess the dynamics of the asset and its potential for rise. ATH is also used to determine market trends: during a strong bullish movement, analysts predict possible new highs based on momentum and market sentiment.

The term ATH comes from the field of traditional finance. In the stock market, reaching a new all-time high often indicates the good health of a company. In the cryptocurrency industry, ATH can also signify growing interest in the project and its success.

ATH and its counterpart ATL

In contrast to ATH, there is an indicator of the historical minimum (ATL), which denotes the lowest price of an asset for the entire duration of its existence. While reaching ATH is often seen as a sign of rise, updating ATL can raise concerns among traders, especially during bear market periods.

Several important aspects regarding ATL:

It does not guarantee further decline. Reaching a historical minimum does not mean that the price will necessarily return to that level.

ATL can create favorable conditions for purchasing, especially if the project demonstrates strong fundamental indicators.

When analyzing cryptocurrency, it is important to consider not only price indicators but also the technological component, the development team, the project's evolution, and its market prospects.

Market Dynamics at ATH

When cryptocurrency reaches ATH, the market experiences increased volatility. Some traders realize profits, while others, succumbing to FOMO, start buying actively. At such moments, ATH often becomes a resistance level from which the price may retrace.

There are two main trading strategies applicable in such situations.

Strategy for rise: trading on the breakthrough

If the price confidently breaks through the ATH, it may signal the continuation of an upward trend. The main stages of trading on the breakout include:

1. Identifying Opportunities: analyzing the chart for strong bullish momentum, increased trading volumes, and a positive news background.

2. Confirmation of the breakout: it is important to ensure the sustainability of the breakout, for example, through retesting the level.

3. Defining the entry point: as a rule, entry is made after the price has stabilized above the ATH.

4. Placing a protective order: the stop-loss is set slightly below the broken level to manage risks.

5. Profit realization: you can use a trailing stop or pre-determine the take-profit level.

However, it is important to remember that breaking the ATH does not always lead to a sustainable rise, so it is crucial to consider the possibility of corrections.

Strategy for Decline: Trading on Pullbacks

After reaching ATH, the market often enters a correction phase. To trade on the pullback, you can use the following tactic:

1. Retracement Identification: a price decline after ATH is usually accompanied by a decrease in trading volumes and a weakening of the upward momentum.

2. Confirmation of reversal: looking for signs of a bearish trend formation, such as breaking support levels or signals from technical indicators (RSI, MACD).

3. Choosing the right moment to enter: opening short positions is done after receiving confirmation of the beginning of the pullback.

4. Setting a protective order: a stop-loss is placed above the ATH level to limit potential losses.

5. Profit fixation: using a trailing stop or setting a take profit when the target is reached.

Understanding the mechanisms of ATH and ATL allows traders to better navigate market dynamics and make more informed decisions. A key factor for success is the ability to control emotions and apply sound trading strategies in conditions of increased market volatility.