I know I know. People here HATE analysis and just want the same posts every time about DCA/Hodl/self-custody. But I will give this a try. Please have an open mind. I spent quite some time on writing this post.

What are Fibonacci retracement levels?

Fibonacci retracement levels are horizontal lines that indicate areas of potential support or resistance in the price movement of an asset, based on the Fibonacci sequence (math). These levels are derived from calculating the ratio of the high and low points on a chart and marking the key Fibonacci ratios of 23.6% (0.236), 38.2% (9.382), 50% (0.50), 61.8% (0.618) and 100%. They also provide areas of interest for new highs. Common (local) tops are 1.618, 2.618, 3.618, and 4.236.

Examples

(1) Bitcoin's recent top.

When drawn from 2017 all time high to the 2018 bear market low, it topped exactly at the 4.236 Fibonacci level, so a 1.25 trillion market cap.

https://preview.redd.it/edjk3dgpe2wa1.png?1376&format=png&auto=webp&s=0754b46c88ccb92a04fb9132a6cfe2eefc6d8bc4

(2) Ethereum's top

When drawn from the 2018 all time high to the 2018 bear market low, Ethereum did the exact same thing, topping at the 4.236 Fibonacci level.

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https://preview.redd.it/olvw4ej7f2wa1.png?1388&format=png&auto=webp&s=97cbb010042c74755d8558da6da7cc6dc3d207d0

(3) Total market cap

You guessed it. Same thing. Nailed the 4.236 Fibonacci level. Do you see how the price action adheres to the Fib levels? That is not a coincidence.

https://preview.redd.it/1t8py3zif2wa1.png?1375&format=png&auto=webp&s=f361ae5a31ce8972b6d0c502d3ad7922207a8d8f

(4) S&P 500

Even the S&P 500 topped around this area at the end of 2021. Ironically right around the moment when the FED presidents started selling their stocks due to "ethical concerns" lol.

https://preview.redd.it/9i5h28rjg2wa1.png?1376&format=png&auto=webp&s=6b80c7f68b999fa93b5667d0de657d11e4bfa880

(4) Moons + example of practical use by me

Now you are going to call me crazy, but the reason I took profit at the $0.36 level is because that is the 1.618 Fibonacci level. Exactly where we rejected. You will see in all the charts above that the 1.618 gives a strong reaction.

https://preview.redd.it/41i2skztf2wa1.png?1386&format=png&auto=webp&s=a11050dd9bebba6b1d51fad3be58f225f45b3c69

Questions and answers

• This sounds stupid? Yes. It does. Very stupid. That was my first thought too. But as I started learning more about it, I started seeing it all over the place.
• How does it work? It likely works because enough big players are aware of Fibonacci retracement levels. Hence, similar to how a few key moving averages work (e.g., 200 day moving average), it functions as a psychological mechanism.
• What do you use this for? Identifying (local) tops to sell and good moments to buy. I prefer to use this on bigger timeframes. I set targets to take profits in advance based in part on this tool. Some people did this years ago during the 2018 bear and took profit at the Bitcoin and Ethereteum top. Note that I do not solely rely on Fib levels.
• Does this always work? No its not perfect. But the key levels often give a reaction.
• How do I use it? There's a lot of guides online. You can use this with free tradingview.
• Why use the market cap charts? I think these are more informative due to inflation and typically, they seem to be a lot more accurate.

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EDIT - Someone asked me what the profit levels would be for ETH/BTC. See the charts below:

• Bitcoin - 4.236 is at 4.55 trillion, so about a 7x from here
• Ethereum - 4.236 is at 2.10 trillion, so about a 8.5x from here