Bitcoin has achieved a remarkable milestone, surpassing a market value of $107.8K.

Bitcoin has achieved a remarkable milestone, surpassing a market value of $107.8K. This surge can be attributed to a combination of persistent disbelief among retail investors and aggressive accumulation by institutional players. Recent excitement has been further fueled by Donald Trump's pro-crypto stance. His announcement to appoint 

 has been met with enthusiasm, especially since it signals the removal of Gary Gensler, who has often been viewed as an obstacle to crypto growth. As Trump reiterated his plans for a U.S. strategic Bitcoin reserve, the sentiment in the crypto community has grown increasingly positive, suggesting a potential shift in regulatory dynamics that may benefit the market.

Meanwhile, the number of wallets holding between 100 to 1,000 BTC has risen significantly. In the past month, there’s been a net increase of 1,289 such wallets on the Bitcoin network, representing 9% growth in a short time frame. Moreover, these wallets have collectively added approximately 214,900 BTC to their holdings, marking a 5.1% increase in total assets.

Institutional Influence and MicroStrategy's Role

The current Bitcoin rally differs from previous ones, being primarily institutional-driven rather than retail-focused. MicroStrategy’s Executive Chairman, Michael Saylor, has made significant Bitcoin purchases, recently acquiring over 36,900 BTC. This has led to mixed reactions on social media: while many praise Saylor as a visionary, critics express concerns about the company's reliance on borrowed funds for these acquisitions. The market's response to MicroStrategy's buying spree underscores its influence on Bitcoin's perception as a legitimate investment. Additionally, rising metrics, such as daily active addresses and an increase in higher-tier Bitcoin wallets, indicate growing utility and institutional interest in Bitcoin, suggesting a more sustainable path for this bull market.

Chainlink has emerged as a key player in the crypto space, achieving a 51% increase in December 2024. Its advancements in the CCIP have attracted traditional financial institutions, further legitimizing its technology. The launch of Chainlink’s new staking program has not only increased user engagement, but has also reduced selling pressure. Meanwhile, the MOVE token, part of The Movement Network, experienced an impressive 84% rise shortly after its debut, driven by airdrop events and exchange listings. Despite concerns about potential sell-offs, MOVE’s innovative approach positions it well for future growth in the Ethereum scaling landscape.

Advanced

Intro to Santiment.png

Bitcoin Tests New ATH as Wallets Holding Bitcoin Surge to New Highs; LINK and MOVE Outperform

Learn about peaq network, a Layer 1 blockchain purposely built and optimized for dePIN and RWA.

Decentralized physical infrastructure networks (DePINs)

 are currently among the hottest sectors in the crypto space. peaq, a 

 blockchain purposely built and optimized specifically for these markets, aims to power a global infrastructure revolution using DePIN technology.

This article introduces you to the peaq network and the PEAQ token, and explores why this L1 chain is so popular among real-world asset and 

A decentralized physical infrastructure network (DePIN) is a network that uses blockchain technology to build and operate real-world infrastructures with decentralized governance and ownership. DePIN stands in sharp contrast to the traditional model, in which centralized entities manage their ecosystems with complete control.

DePINs take a community-driven approach and use crypto incentives to expand and maintain their infrastructures. This significantly reduces up-front investments for these networks, and empowers users with the ability to set up their own devices and earn tokens as providers. DePIN leverages this decentralized and distributed architecture to eliminate single points of failure (SPOFs) and enhance the security of the infrastructure.

Some of the most notable DePIN projects are as follows:

 is a high-performance L1 blockchain purposely built and optimized for DePINs and 

. Offering a wide range of tools for projects, over 50 decentralized DePINs in 21 industries are developing on the peaq chain. As the world's largest and fastest-growing DePIN ecosystem, peaq network hosts more than 3 million machines, vehicles, robots and devices and accounts for over $1 billion worth of total value in DePIN devices.

peaq network was co-founded by Max Thake, Leonard Dorlöchter and Till Wendler, bringing together their extensive expertise and experience in blockchain, decentralized networks and entrepreneurship.

Thake, a writer and entrepreneur, excels at simplifying complex technology and using this approach to solve problems. Dorlöchter, active in the blockchain space since 2015, is passionate about decentralization and self-sovereignty and is a member of the 

. Wendler has a strong background in tech startups and decentralized systems, which he leverages to navigate the complexities of the 

The trio, together with other team members, have dedicated their efforts to enable a more inclusive, transparent and equitable world through the advent of 

In March 2024, peaq raised $15 million in a round led by Borderless Capital and Generative Ventures. Additionally, the project secured $6 million and $2.5 million of funding from investors in June 2022 and June 2021, respectively, and participants contributed nearly $20 million to peaq network's public sale in May 2024, bringing the total funds raised to an impressive $43.48 million.

Besides Borderless Capital and Generative Ventures, notable investors behind peaq network include Animoca Brands, CMCC Global, The Spartan Group, DWF Labs, Fundamental Labs, Moonrock Capital, HashKey Capital and GSR.

peaq's modular DePIN functions are designed to empower developers to build next-generation decentralized physical networks. DePINs and 

 (DApps) can leverage these ready-to-use functions to equip their ecosystems with essential core functionalities. These include self-sovereign machine IDs, data verification, role-based access control, data storage, autonomous 

, machine payment processing and data indexing.

Modular DePIN functions work as building blocks for decentralized physical infrastructure networks, enabling them to explore synergies with peers and expand their demand sides. They’re available via the peaq SDK (software development kit) in JavaScript, allowing the seamless deployment of modules with approximately 15 lines of code. With peaq, developers can also enjoy increased flexibility and convenience with Wasm and 

peaq network's fast-growing ecosystem consists of over 50 DePINs in 21 industries, including energy, mobility and telecom. Some of the top DePIN and RWA projects building on peaq’s purpose-built L1 chain include :

In terms of use cases, peaq provides a wide range of utility for enterprises, ranging from mobility and connectivity to 3D printing, cloud gaming and drone delivery.

Practical examples of peaq network uses include co-creating the standards and infrastructure for the future of mobility under the 

. The project has an overall size of more than €20 million ($21 million) and includes participants like Bosch, Airbus, Continental, 

 in its car-sharing fleet to the peaq ecosystem, enabling users to invest in them via the web3 car-sharing app and earn rewards from rides they provide.

peaq network is powered by its native PEAQ token, which was launched on Nov 12, 2024 alongside the peaq blockchain's mainnet. The cryptocurrency's key utilities for users include the following:

With no cap on its maximum supply, PEAQ's total supply at genesis stood at 4.2 billion tokens, with an initial inflation rate of 3.5% that will decrease annually by 10% and stabilize once the network reaches 1% inflation. Currently, 4.212 billion PEAQ is circulating in the market. You can find out more about the token's genesis allocation 

peaq's network of DePIN and RWA projects is expanding at a rapid pace. Some key statistics and figures in this field are as follows:

With a high-performance, purpose-built Layer 1 blockchain, peaq network powers a fast-growing number of DePIN and RWA projects to power a global infrastructure revolution. Boasting more than $40 million in funding and over 50 DePINs, $25 million managed in tokenized real-world assets and 3 million devices within its ecosystem, the L1 chain already has a solid foundation to realize its vision and achieve its goals.

 via Bybit’s user-friendly and intuitive trading platform as a Perpetual contract? 

Intermediate

peaq.png

Peaq Network: A Layer 1 Blockchain Purpose-Built for DePIN

Rootstock (RBTC) is an EVM- and smart contract–capable Layer 2 sidechain for Bitcoin designed for DeFi use cases.

 (DeFi) sector back in 2017 is firmly associated with the 

 (ETH) blockchain. It was Ethereum that introduced the concept of 

, and the first prominent DeFi protocols were all born on this blockchain. For a while, it seemed like 

 (BTC) stayed away from the emerging DeFi phenomenon. It’s only in the past few years that the Bitcoin DeFi ecosystem, dubbed BTCFi, seemingly started to show the first signs of life. This impression is, however, not entirely correct. As early as January 2018, the first DeFi-focused 

 solution for Bitcoin — the Rootstock (RBTC) sidechain — celebrated its mainnet debut.

Rootstock remains the oldest and longest-running Layer 2 platform for the Bitcoin ecosystem. It’s smart contract-capable and highly compatible with the 

 (EVM). While the platform can support all kinds of 

 (DApps), it specifically focuses on the DeFi niche, with nearly all of its leading apps dedicated to crypto finance use cases. Along with smart contract functionality, Rootstock enjoys the famed security of Bitcoin, thanks to its merged mining with the world's largest chain. The sidechain also features superior scalability and lower transaction fees than Bitcoin’s 

With this combination of benefits, it’s no wonder that the Rootstock sidechain has managed to keep a leading position in the fast-developing BTCFi field all these years.

 (RBTC) is a smart contract–capable Layer 2 sidechain designed for Bitcoin DeFi applications. Rootstock's native cryptocurrency, RBTC, is an asset pegged to BTC at a 1:1 ratio.

 Users can transfer their BTC funds to the sidechain, where their coins are converted to RBTC. From then on, users are free to use the RBTC crypto to make use of Rootstock's extensive ecosystem of DeFi apps and tools. Rootstock represents a major way for Bitcoin holders to enjoy smart contract–powered DeFi applications without having to move their assets and activity to Ethereum or other smart contract chains.

Since the Bitcoin network has virtually no smart contract capabilities, many DeFi-minded BTC holders have to convert their funds to Ether or other smart contract chain coins to enjoy crypto finance opportunities on those blockchains. While Ethereum, 

 (ADA) and other prominent smart contract chains offer a diverse array of DeFi solutions, the problem with converting BTC to these coins is the loss of peg; e.g., by exchanging BTC to ETH, you’re decoupling your funds from the world's largest cryptocurrency, well regarded by many investors as the gold standard in crypto investment.

Rootstock solves this issue by offering a BTC-pegged asset, RBTC, that can be swapped back for BTC at any time and returned to the Bitcoin Layer 1 environment. The platform essentially lets you enjoy a plethora of DeFi opportunities while keeping your overall funds tightly pegged to BTC.

Rootstock features EVM compatibility through its Rootstock virtual machine (RVM). This makes porting Ethereum DApps to the sidechain a breeze. The platform also enjoys the security of Bitcoin through a merged mining procedure, whereby miners can use the hash power contributed to securing the Bitcoin network to simultaneously mine blocks on Rootstock as well.

Rootstock's block production time is just 30 seconds, twenty times as frequent as Bitcoin's 10-minute intervals. This allows for fast and efficient transaction processing. At the same time, to ensure complete security of operations, Rootstock normally requires that each transaction go through a minimum of 12 confirmations, which takes the total time for complete transaction finalization to six minutes.

 difficulty is considerably lower than Bitcoin's, and its network congestion isn't anywhere near the levels of Bitcoin or Ethereum. As a result, gas fees on the chain are notably lower than on Bitcoin and Ethereum, with an average transaction fee of around five cents.

The Rootstock sidechain was first conceptualized in 2015 by a group of Argentinian software engineers from RSK Labs. It was officially launched in January 2018, making it the oldest existing Bitcoin Layer 2 solution. In its earlier years of operation, the platform was known as the RSK blockchain, but rebranded to Rootstock in 2022. The project's co-founders are Diego Gutiérrez Zaldívar, Adriȧn Eidelman, Gabriel Kurman and Sergio Demian Lerner.

Rootstock uses an address system compatible with and similar to Ethereum's, with 40 alphanumeric characters and an account-based model. This differs from the 

 (UTXO) model employed for Bitcoin transactions. Transactions on the sidechain directly modify account balances, similar to Ethereum, rather than adjusting unspent output amounts.

This account-based address system ensures adherence to EVM compatibility and easy accommodation of DApps ported from EVM chains.

, known previously as the RSK virtual machine, is a processing engine used by the sidechain. It's EVM-compatible, allowing developers to easily port and adapt Ethereum smart contracts and DApps to the Rootstock environment. Additionally, developers can use Solidity, the primary programming language used within the Ethereum ecosystem, to build Rootstock-based applications.

The project's team tries to maintain compatibility between RVM and EVM carefully. Around once a year, the Ethereum developer community performs a 

 of the blockchain, upgrading it to a new version. The key goals of these upgrades are to introduce new functionality, address security concerns and improve existing features. If the new features introduced by Ethereum align with the ethos and goals of the Rootstock project, the team initiates a corresponding hard fork upgrade to the sidechain and RVM in order to maintain the snug compatibility between the processing engines of the two chains.

Rootstock's security mechanism is well protected, thanks to 

 with Bitcoin. Like Bitcoin's Layer 1, Rootstock uses the 

 (PoW) block generation procedure. Miners can merge-mine RBTC using the same 

 power they contribute to mining Bitcoin. This provides an excellent way for miners to earn additional crypto income without the need to contribute more computing capacity. Merged mining is also a key way for PoW blockchains to reduce their environmental impact.

Since the average block time on the Rootstock blockchain is only 30 seconds, miners can expect more frequent rewards from their block generation activity. In general, Rootstock's mining difficulty is lower than Bitcoin's, allowing less powerful mining machines to still generate income on the network.

Rootstock's mining rewards are paid out in RBTC, the BTC-pegged asset that we'll cover in more detail later in the article.

 is Rootstock's system to ensure a peg between BTC and RBTC and the secure transfer of assets between the sidechain and Bitcoin Layer 1. The Rootstock PowPeg allows anyone to lock BTC on the Bitcoin chain and get securely issued RBTC on the Rootstock side. PowPeg also facilitates the process of burning RBTC on Rootstock and receiving the requisite amount of BTC on Layer 1.

Rootstock PowPeg uses Bitcoin's PoW to maintain the security and integrity of the peg in conjunction with institutional nodes running specialized 

 devices. PowHSMs securely sign transactions involving the transfer of assets between Rootstock and Bitcoin. The group of nodes running PowHSMs, called the PowPeg Federation, is currently made up of nine reputable organizations in the blockchain sphere — BlockVenture, Luxor, Сollider, Сonstata, Mycointainer, pNetwork, Sovryn, Xapo and RootstockLabs.

Rootstock Smart Bitcoin (RBTC), previously known as RSK Bitcoin, is the platform's main cryptocurrency. RBTC is pegged to BTC at a ratio of 1:1 through the securely enabled PowPeg mechanism covered above. Like BTC on the Bitcoin blockchain, RBTC is used to pay transaction fees and reward miners on the Rootstock network. However, unlike BTC, RBTC can also be used within DApps for functions like collateral provision, lending, borrowing and more.

Given RBTC's peg to BTC, it’s not surprising that its tokenomics borrows some critical parameters from Bitcoin. RBTC's total supply is specified at 21 million, matching the 

The Rootstock platform also has a second token, RIF, primarily designed to support DApps that are part of the 

 (RIF) protocol, a layer built on top of the Rootstock chain for apps designed for staking, lending, payments and other DeFi use cases. There are currently several RIF DApps on Rootstock that can use the RIF token.

 within these DApps. It can also be staked on Rootstock to open up the opportunity to participate in on-platform 

. By staking RIF, you’re issued stRIF tokens, which enable you to participate in governance votes via the 

. This is the platform's primary governance entity, through which community members — users and developers — can influence the future direction and improvements to the sidechain and its ecosystem.

For instance, during the early stages of the DAO's operation, community members can vote on the allocation of ecosystem grants. In the future, decision-making on other initiatives (e.g., rewarding developers contributing to the growth of Rootstock) will be implemented.

RIF is a supply-capped token, with a total and maximum supply of 1 billion. The token's overall supply allocation shares, as outlined in the project's white paper, are as follows:

As a leading Bitcoin sidechain capable of executing smart contracts, Rootstock boasts a thriving ecosystem of DApps, primarily in the DeFi domain. As of mid-December 2024, the total number of applications, utility tools, wallets and other smart contract–enabled solutions on Rootstock stands at close to 180.

One of the leading applications on the chain is Sovryn, a decentralized Bitcoin trading and lending platform. Another popular DeFi app is 

 (AMM) built on the Ethereum blockchain. In addition to a plethora of DeFi apps, Rootstock has solutions for 

The Rootstock Runes Mock Bridge project allows developers to create Rune tokens on the sidechain. Introduced in April 2024, the 

 has opened a way to efficiently create Bitcoin-based fungible tokens by leveraging the blockchain's native UTXO transaction model. Rootstock's Runes Mock Bridge supports the process of creating these tokens by first etching Runes on a Bitcoin, and then mirroring their representations to the sidechain. The replication of Bitcoin-based Runes tokens on Rootstock is enabled via the ERC-1155 token standard. This is a standard utilized on EVM-compatible chains to transfer blockchain assets of both fungible and non-fungible varieties efficiently.

Rootstock Token Bridge is a bridging solution designed to facilitate the transfer of ERC-20 assets between the Rootstock sidechain and Ethereum. Although Rootstock and Ethereum share the same address format and model, sending assets between these chains directly via your wallet may not work. Instead, to transfer assets, you are advised to use the Rootstock Token Bridge, which will convert the transferred tokens to a requisite format.

 projects active on the Rootstock chain. One of these, NFTs2Me, allows you to create NFTs with no coding skills required. The other project, coNFT, is a comprehensive multichain platform that offers users a wide variety of NFT-focused products and services — 

 name service, analytics and more. coNFT has access to data and NFT services across over 100 blockchain platforms.

The oldest Bitcoin sidechain in existence, Rootstock continues to play a key role in the development of Bitcoin-linked DeFi — BTCFi. The platform's EVM compatibility also positions it as a major bridge between the Ethereum and Bitcoin ecosystems — the blockchain environments of the world's two leading cryptocurrencies by market capitalization.

Over the years, Rootstock has accumulated a comprehensive arsenal of DeFi solutions — DEXs, liquidity management apps, 

 platforms, lending and borrowing protocols, NFT utilities and more. At the same time, RBTC's peg to BTC presents a unique way for crypto users to enjoy these DeFi protocols while holding an asset tightly coupled with Bitcoin's market price.

Developers can also enjoy a familiar environment, with the Solidity programming language and an EVM-compatible account model utilized by the sidechain.

Importantly, Rootstock offers efficient transaction processing — supported by its 30-second block intervals — and lower transaction fees than either Ethereum or Bitcoin. With gas fees a major concern for users on both of these Layer 1 chains, Rootstock is a platform that deserves close attention from both DeFi users and developers.

rootstock bitcoin.png

Rootstock (RBTC): Boosting Bitcoin DeFi With Smart Contracts

Dive into World Liberty Financial, a decentralized finance (DeFi) project inspired by Donald Trump, and its native WLFI token.

 (DeFi) project inspired by Donald Trump, the incoming president of the United States. The project aims to provide innovative financial solutions while leveraging the Trump brand's influence. This article will explore the project’s key features, the Trump family's involvement and the utility and tokenomics of the WLFI token.

 is a DeFi project designed to revolutionize modern financial transactions. This project operates on blockchain technology and integrates advanced DeFi tools that allow users to trade, earn and borrow with efficiency. 

 has publicly promoted the launch of World Liberty Financial and its native WLFI token.

On October 16, 2024, Donald Trump posted on X announcing that the project was live. His family members are also significantly involved in this exciting project. Donald Trump Jr. and Eric Trump are at the forefront, working diligently to develop the platform and promote its goals.

Barron Trump, just 18 years old and a freshman at NYU, has taken on the role of “Chief DeFi Visionary.” The Trump family has utilized social media to build interest in World Liberty Financial, asserting that it could transform personal finance management for individuals everywhere. Despite their involvement, the project claims to remain non-political and separate from any political campaign. 

Aside from Donald Trump and his family, there are other people on the team behind this DeFi initiative. The official website lists five co-founders: Chase Herro, Zak Folkman, Steven Witkoff, Zach Witkoff and Alex Witkoff. The project also features notable advisors, including Sandy Peng from Scroll and Luke Pearson from Polychain Capital.

Its primary mission is to empower users by providing them with tools for financial independence. Below are some key features.

World Liberty Financial Holdings has recently captured attention through its 

. The World Liberty Multisig wallet completed $12 million worth of transactions, demonstrating a clear strategy to build a well-rounded cryptocurrency portfolio.

 was 2,631 ETH for $10 million, purchased at $3,801 per token. Ethereum’s smart contract capabilities make it a cornerstone of many DeFi projects, solidifying this as a strategic decision for the platform. The wallet also secured 41,335 LINK for $1 million at $24.20 each. Additionally, $1 million was allocated to purchase 3,357 AAVE at $297.80 per token. AAVE is a leader in DeFi, offering seamless lending and borrowing solutions.

The WLFI token is important in the World Liberty Financial ecosystem. Built as an ERC-20 token, it powers several essential functions on the platform:

The tokenomics of WLFI include a total supply of 100 billion tokens. Below is an outline of its distribution structure:

The launch of the WLFI token has faced significant challenges and has failed to meet its initial sales targets. Investors showed less interest than anticipated, leading to sluggish sales for the World Liberty Financial project. This disappointing start raised concerns about the project's viability in the competitive decentralized finance (DeFi) landscape. Despite the backing of Donald Trump, the token struggled to attract the expected level of investment during its initial offering.

In a surprising turn of events, Justin Sun, the founder of the TRON blockchain, stepped in with a substantial 

. Sun's purchase allowed him to acquire over half of all WLFI tokens sold, positioning him as the largest investor in the project.

World Liberty Financial aims to make a significant impact in the DeFi sector, which has largely underperformed throughout the current bull market. The potential of clearer regulations for the wider crypto industry under the incoming Trump administration has boosted investors’ hopes for a revival of the DeFi space. 

Furthermore, backing from the Trump family has drawn considerable attention to the World Liberty Financial project. However, it’s essential for potential investors to 

 before committing funds to avoid scams and ensure safe engagement with financial projects.

world liberty financial.png

World Liberty Financial: Trump's DeFi Project

Trading

Harmonic butterfly pattern has a specific shape and distance between each trend of the pattern. It's useful for traders to identify the turning points in the market. Learn how it works.

Harmonic_Butterfly_Pattern.png

Bullish_and_Bearish_Butterfly.png

Harmonic_Butterfly_Patterns.png

Bitcoin’s_Example.png

Bitcoin’s_Example_2.png

Bitcoin’s_Example_3.png

How_to_Trade_the_Harmonic_Butterfly_Pattern.png

How_to_Trade_the_Harmonic_Butterfly_Pattern_2.png

Placing_a_Long_Entry_Position.png

Managing_Your_Trade.png

Exit_Strategy.png

Breakout.png

Bullish_vs._Bearish_Harmonic_Butterfly.png

Technical traders analyze the market using trading patterns and signals to profit from the rising and falling markets with smaller yet more frequent profits. Though the accuracy for some 

 is debatable, but most patterns have proven their reliability for traders to gauge the market behavior and help to critically identify the entry and exit points.

So what exactly is a harmonic butterfly pattern? In this article, we’ll discuss what the pattern looks like, how to identify it, and more importantly, how to trade it.

The harmonic butterfly is a five-point reversal chart pattern used in technical analysis by traders to help identify turning points in the market. It is a trading pattern with a specific shape and distances between each trend of the pattern.

The harmonic butterfly can be used in any liquid market, such as crypto, and on any time frame chart. The butterfly is a part of the harmonic family of patterns, which include other formations such as Gartley, bat, crab, and AB=CD.

The genesis of harmonic price patterns was established by H.M. Gartley back in 1935. He wrote about a 5-point pattern which became known as the Gartley. Harmonic patterns were eventually improved upon by including relational distances between each of the points in the configurations. This was accomplished by adding 

 to the analysis to help traders analyze the likelihood of the developing pattern in real-time.

What Does a Harmonic Butterfly Look Like?

The harmonic butterfly pattern is a five-point pattern, with points labeled X, A, B, C and D. When you connect a line, or trend, between each of these points, it delineates four waves.

The harmonic butterfly pattern earned its name because when the formation is completed, the resulting image with the lines drawn resembles a stick-figured butterfly.

This pattern can print within an uptrend or downtrend, but always starts at point X. If the trend from X to A is a downtrend, then the pattern will look like a butterfly and result in a bearish reversal.

If the trend from X to A is an uptrend, then the pattern will look like an upside-down butterfly and result in a bullish reversal.

The harmonic butterfly appears in both bullish and bearish scenarios. The butterfly pattern which results in a bullish rally (bullish butterfly) to a new high looks like an upside-down butterfly.

The pattern which results in a bearish correction (bearish butterfly) looks like an upright butterfly.

This pattern can appear within any market, such as crypto — or within any chart time frame — because financial markets are fractal. That is, the patterns you see on smaller time-frame charts are smaller versions of the same patterns you see on larger time-frame charts.

Once the X-A-B-C-D pattern is completed, traders can anticipate and target a full retracement of the entire pattern beyond the extreme of point A. Essentially, when a user spotted the five points, they can make a trade that targets beyond point A. 

Identifying the Harmonic Butterfly Patterns

The butterfly pattern is heralded as “harmonic” because the formation is a combination of shape and math which appears repeatedly in financial markets. The basis of this harmony is a derivative of the Fibonacci sequence, which creates ratios of 0.618 and 1.618. These ratios are found in natural structures, such as seashells or sunflowers. Due to these ratios appearing repeatedly throughout nature, numerous traders have deemed them significant within financial markets as well.

Identifying the harmonic butterfly pattern can be done with the Fibonacci retracement tool — and perhaps some imagination.

Starting with the bearish butterfly, after the downtrend creates the XA wave, the market rebounds higher to point B, which must be a 78.6% retracement of the XA downtrend. Apply your Fibonacci retracement tool from point X to point A, then activate the 78.6% and 127% levels (we’ll use the 127% level later.)

Beginning from point B, the market experiences another downtrend to point C. However, the strength of the second leg down (BC) isn’t as strong as the first XA trend lower.

Additionally, point C generally retraces about 38.2% to 88.6% of the AB leg. As a result, point C is a partial retracement of AB, and doesn’t break below the low price at point A. Apply another Fibonacci drawing starting from point A to point B, and activate the 38.2% and 88.6% levels. Point C should fall inside that zone, which has been created by 

After this false trend lower is over, the market then rallies hard, breaking above point X. This new high becomes point D. Point D can be measured and anticipated ahead of time to be an extension of the length of XA by a factor of 1.27. The 127% figure from our first Fibonacci retracement drawing has come back to provide a potential target.

Keep in mind, these retracement levels and target zones are just that — zones. It’s rare for prices to reverse 

 at these price levels. Therefore, look for a reaction to take place nearby. In some instances, prices may fall a little short or move slightly beyond these zones. If prices do move beyond these zones, you would want to see a sharp reversal, indicating the market is respecting these pivot zones.

As Bitcoin’s price rallied into the early portion of 2021, momentum began to slow, and Bitcoin started a topping process — which carved a bearish butterfly pattern.

On March 13, 2021, Bitcoin starts a small correction to the March 25 low. The 78.6% retracement level of this correction is at $59,326. Then, the price rallies to a high of $60,365 on April 1, marking point B. This price high is about an 85.8% retracement, a little larger than the ideal 78.6%, which is okay.

Then, another correction lower leads to point C, which is a 49.0% correction of the A to B uptrend. This is right in the middle of the 38.2% to 88.6% corrective zone, considered normal for the butterfly pattern.

Beginning April 7, Bitcoin undergoes one final rally to complete the formation. Within butterfly patterns, the final high typically registers around the 127% extension of the XA trend. In this case, for Bitcoin, the 1.27 extension is estimated at $65,573. This rally carries to new all-time highs and tops out at $64,999, less than 1% from the estimate, arriving at a 1.26 extension. 

At Bitcoin’s high in April 2021, a beautiful bearish butterfly pattern has been completed.

How to Trade the Harmonic Butterfly Pattern 

Once you’ve spotted a potential butterfly pattern, setting up a trade opportunity is fairly straightforward. Due to the harmonic wave nature of this formation, we can identify its potential reversal zone ahead of time. That way, if the price does make its way to that zone, we can look for symptoms of a change in trend.

From late August to September 2021, Ether (ETH) appears to be carving a bullish harmonic butterfly pattern. The geometry of the form meets idealized parameters.

For example, point B retraces 99.8% of the XA trend. This is a little more than we’d like to see. However, that deep retracement is immediately met with buyers, and the price pushes higher, leaving behind a very long downside wick. Over the next several days, Ether (ETH) tries to push lower, back to the 78.6% retracement level and is immediately met with buyers. Though the initial dip is larger than 78.6%, you can see how the market’s geometry is trying to carve this pattern.

The subsequent rally to point C retraces 67.0% of the AB trend, which is normal. This generates a potential bullish reversal zone for point D at $2,718.05.

The price then dips, and corrects just beyond the 127% target zone, having started to rally. 

How would a trader manage this trading opportunity?

When Ether tagged the target zone, it left behind a large downside wick. This is evidence of buyers rushing to support the market’s pricing, as they believe ETH to be a good value.

The simplest way to set up the long entry is to use a breakout trade. This can be set up with a downward sloping resistance trend line that, when broken, can act as the entry signal.

Or, you can identify horizontal levels of resistance and wait for the price to break above, signaling a long entry.

Typically, a trader will pick one of these levels of resistance to trade from, but I’m showing you both so you can see how the two might appear.

In essence, once the price rallies and breaks the resistance level, it will signal a long position.

In the example above, using ETH, the price eventually rallies to break resistance. This places the trader in a long position.

At this point, the trader will want to set the stop loss just below the swing low at point D. This way, if prices continue to fall, then some other pattern is at play, and we can exit the trade with the majority of the account’s capital preserved.

Once the position has been entered and the 

 is set, we can then plan out the profit target. On many occasions, a successful harmonic butterfly targets the extreme price beyond point A.

In our ETH example above, point A is near $4,035. This level can be seen as an early target. If this price level is reached, then the trader may want to close a portion of the position and let the remainder continue to float.

This way, if the trend becomes really strong, the trader can trail the stop loss and take profits at much higher levels.

It turns out that ETH’s trend was surprisingly strong, having run up to above $4,800, even though the breakout alert from the butterfly was originally triggered around $3,100.

There may be some instances where the market doesn’t reverse from the 127% potential reversal zone. In these cases, the market may pause, but it continues to extend beyond the 127% zone.

This is why using a breakout trade setup as described is beneficial. Let’s assume for a moment that Ether is unable to rally at the 127% zone. If we set up a bullish breakout trade at horizontal resistance, and the price fails to reach the breakout signal, then we never enter into the bullish trade (see the left side of the image below). We’re essentially saved from a losing trade.

Keep in mind that this bullish breakout setup won’t keep you from all losing trades. There are times when the market will rally and hit your bullish breakout signal at horizontal resistance, but then correct lower (see right side of the first image above).

This is why it’s important to place a stop loss on every trade. In these situations, your stop loss will trigger, taking you out of the trade before a much more significant loss. However, a small losing trade is better than a large losing trade — which can destroy your account balance.

Apart from the “upside-down” and “right side up” bullish and bearish versions of the butterflies, the biggest difference between them is how each pattern begins. 

If XA starts as an uptrend, then the pattern will resolve as a bearish butterfly.

If XA starts as a downtrend, then the pattern is forming the bullish butterfly.

The other components, such as the geometry and ratio levels between the points, are all relative to one another and remain the same.

Is the Harmonic Butterfly Pattern Reliable?

The harmonic butterfly pattern has some similarities to, and differences from, other chart reading patterns. We generally want to know how reliable a pattern is. However, the truth is that a pattern’s reliability is based on the analyst’s ability to read it correctly.

The geometric nature of the pattern which Scott Carney has thoroughly researched can make traders more confident when they clearly identify the formation on a chart. Moreover, the pattern has a specific set of ratios to make its identification more reliable. If these ratios and structures are present, the greater’s the chance the pattern is present as well.

No pattern in trading is 100% correct. There are times when a pattern displays all of the correct ratios and has the right look — but then fails.

This is why it’s important to place a stop loss on every trade. Using the guide above, you can correctly identify a place to set the stop loss, without risking too much or too little.

The harmonic butterfly pattern is a popular structure followed by seasoned traders. For those traders who are familiar with Fibonacci retracement levels, this pattern generates a specific look and ratio between each trend of the pattern.

However, the pattern is not without limitations. The market can abruptly reverse, which is why it’s important to place a stop loss on every trade.

How to Identify & Trade Harmonic Butterfly Pattern for Profits

Grab Up to 5,000 USDT in Rewards

Grab Up to 5,000 USDT in Rewards