Crypto traders utilize different mathematical indicators and formulas to predict future trends in the market. The golden ratio is a mathematical formula used in arts, architecture, and nature for a long time and is now implemented in cryptocurrencies too. What is the Golden ratio and how is it utilized in crypto, continue reading the article to learn more.
Table of Content
- What is the Golden Ratio?
- History of Golden Ratio.
- Mathematical Formula of Golden Ratio.
- Illustration of Golden Ratio.
- How Does the Golden Ratio Work in Crypto?
- What is Golden Pocket?
- The importance of Goden Pocket.
- How Does Golden Pocket Work in Crypto?
What is the Golden Ratio?
The golden ratio is a mathematical constant derived from the Fibonacci sequence representing a relationship between a pair of numbers, such that each number tends to be the sum of the preceding numbers. This pair of numbers always produces a constant value of approximately 1.618. This ratio is useful in crypto practices to determine retracements, time zones, and fans.
History of the Golden Ratio
Mathematicians and scientists have utilized the golden ratio since historical times. Ancient Greeks were the first to explore the golden ratio, understanding its properties and applications. In 1200, Leonardo da Vinci implemented the Golden ratio in their architecture and design to create a visually appealing model.
From then till now, the Golden ratio has been circulating on different platforms. ‘Fibonacci retracement levels’ used in the crypto industry for predicting potential market movements allowing investors to make informed decisions is derived from the golden ratio.
Mathematical Formula of Golden Ratio
(a+b) / a = a / b= φ
Where the value of φ is 1.618 &
a and b are two numbers.
Illustration of Golden Ratio
If two numbers in the Fibonacci sequence say a and b, where b is larger than a. Dividing b by a yields a value near 1.6, and also adding a and b and dividing the sum by a yields the same value of 1.6.
Consider two numbers, 3 and 5.
Dividing 5 with 3 results 1.66.
Adding 5 and 3 and dividing by 3 gives 1.6.
How Does the Golden Ratio Work in Crypto?
Traders often analyze different levels of market movements, these levels parallel the Fibonacci sequences. The Fibonacci sequences helps to determine the price developments and traders utilize these numbers to analyze the next price rise to make informed decisions. During a market uptrend, a crypto coin meets the critical resistance level of the Fibonacci pattern. During a downtrend, the asset fails to meet the Fibonacci level.
What is Golden Pocket?
Golden pocket is a measure that indicates a price reversal or a starting or ending of a market uptrend. It is represented as a specific range within Fibonacci retracement levels with a value between 0.618 and 0.65 or 61.8 and 65 if represented in percentage. However, these values can tend to appear below these regions if additional criteria are included. These values are connected to the golden ratio directly because the 61.8% retracement level represents a close value of φ.
The Golden Pocket is the point where a price uptrend reverses dramatically, or we can say it is the point just below the reversal point. Entering the cryptocurrency market during this point allows an investor to make huge profits.
The importance of Golden Pocket
When the price of an asset makes a steady upward or downward trend and gets reversed sooner, leading to an increase in buying and selling of assets, signifying the importance of Golden Pocket. By representing the chances of price reversals, retracement levels allow investors to make informed decisions regarding asset trade.
How Does Golden Pocket Work in Crypto?
Golden pocket is a point that lies below a price reversal. A golden pocket point is the best time to enter the crypto market. Traders have to identify the price moves and apply the Fibonacci retracement to this move to analyze the potential prices. Apart from identifying the resistance and support level, Golden pocket is also used in stop loss orders and profit targets.
Final Thoughts
The Fibonacci numbers have made the crypto market more efficient allowing accurate estimation and informed decisions. However, being mathematically derived, their accuracy is still subject to other factors affecting the normal proceedings of the market. Before applying any strategies and formulas in crypto investments, be cautious about the market volatility and associated risks.