Understanding the concept of an all-time high (ATH) in crypto

As the crypto market continues to rally ahead of the Bitcoin halving that's scheduled to happen later this year, we're seeing breathtaking rises for all kinds of coins and tokens. This surge has many crypto traders wondering if we're on the cusp of witnessing a return to the crypto euphoria experienced in late 2021, when Bitcoin managed to hit a peak of $69,040.10 on November 10, 2021. As prices continue to soar and fear of missing out (FOMO) intensifies, there's now a genuine interest in seeing if the market can reclaim its previously established peaks.

Known as all-time highs (ATH) among experienced traders with a traditional finance (TradFi) background, it's a metric that's definitely worth keeping in mind when trading during times of extreme sentiment within the market. Curious about what ATH is and how you can make use of it in your crypto trading plan? Our guide will cover everything you'll need to know about ATH in the crypto markets and the psychological impact it may have on existing crypto prices.

What is the definition of an all-time high (ATH)?

All-time high is a metric that shows the highest price or market cap of an asset in its entire history. This metric applies to various asset classes, including stocks, commodities, and cryptocurrencies. In the context of cryptocurrency prices, ATH refers to the highest last-traded price achieved by a specific coin or token. It's crucial to remember that crypto prices constantly fluctuate throughout the day, and the ATH of a coin or token represents a specific snapshot in time instead of a sustained price level.

While price-based ATHs are widely used, some platforms might also track market cap-based ATHs. This metric considers the total market value of all outstanding coins or tokens of a specific cryptocurrency, calculated by multiplying the circulating supply by the current price. On occasions, an ATH in market cap could be achieved even if the individual coin price hasn't reached its all-time high. This could be the case during a token burn, where the overall circulating supply of a crypto project falls but causes a surge in the crypto's price because of the reduced supply available.

Understanding the ATH metric and its origins

Most people would search for an ATH without even thinking about it. When they approach a chart of an asset, two questions pop up in their mind. The first one is often: what's the asset’s current value? The second one is likely "what was the highest price the asset ever achieved?". That way, traders can gain a ballpark estimation of how the asset is performing based on comparing the two figures. Apart from this, ATHs can also help traders to measure the potential market cap of the coin. ATH can be an effective way to determine market trends. For example, if the asset’s price is growing, analysts will typically attempt to predict the new peak of the asset based on its momentum and sentiment.

As mentioned, ATH is a term that originated from TradFi and is used for asset prices. As a metric most traders are aware of, it typically means that if a company’s stock were to hit a new ATH price, it implies solid company performance. The definition of an ATH within the crypto markets doesn't differ from the one seen in traditional markets. By the same notion, this same metric is sometimes used to assess the growth and success of a crypto project.

ATHs vs ATLs

On the opposite side of the spectrum, we have all-time lows (ATLs). This metric represents the lowest point that the price of an asset has reached in its entire trading history. While ATHs signify potential for future growth and excitement among traders, ATLs can be a source of concern for many long-only crypto traders, particularly during bear markets characterized by sustained price declines.

However, it's important to approach ATLs with perspective. While they highlight past vulnerabilities, they don't necessarily predict the future. Here are some key points to consider:

• ATLs don't guarantee future performance. Just because a cryptocurrency reaches a specific low point in the past doesn't mean it'll revisit that level again. Market conditions and project development can significantly influence future price trajectories for the cryptocurrency.

• Catching the opportunity amid the downturn. For experienced traders, ATLs can present buying opportunities, particularly for projects with strong fundamentals and long-term potential. However, this carries inherent risk and requires thorough research and a long-term trading horizon.

• Focus on fundamentals, not just price. As technical analysis traders will know, it's important to not solely base trading decisions on the fear associated with ATLs. Rather, traders can assess fundamentals by conducting thorough research, understanding the underlying technology and project development of the cryptocurrency, and assessing the potential risks and rewards involved.

By understanding both ATHs and ATLs and approaching them with reasoning and research, traders can navigate the dynamic world of cryptocurrencies while making informed decisions about their holdings.

What happens during an ATH?

When it comes to market trends, reaching an ATH usually signals a major shift in sentiment and volatility. On one hand, you'll have traders with existing positions sometimes running for the exits as they've set the ATH price as a potential take profit or stop loss order.

On the other hand, for those who have been sitting on the sidelines and staying out of the market, there'll likely be traders falling prey to FOMO and choosing to make a trade as it approaches this metric. As the ATH price of a cryptocurrency typically represents a major resistance level, we can expect to see plenty of selling pressure once enough bullish momentum drives it to this price level. As a result, there are typically two approaches to take when trading during situations when there's a case of euphoria within the market.

These trading strategies will be covered in the following sections as we consider both bullish and bearish approaches, so you're not caught off-guard by the sudden volatility in crypto prices.

Trading strategy examples of how to trade during ATHs

While it's easy to be led astray by the euphoria and sentiment driving the bullish rally, it's key to stick to a trading plan so emotions are kept in check while planning and executing your trades. The following trading strategies employ the use of basic technical analysis and concepts like demand and supply zones, so we're able to predict and speculate on where the market is headed.

Bullish ATH strategy: trading the breakout

The allure of capitalizing on a cryptocurrency's surge towards its ATH is undeniable. However, attempting to "trade the breakout" requires a cautious and strategic approach, as chasing past highs can be risky. One example of a way to stay bullish in a market that's close to ATHs is to focus on identifying potential breakout opportunities while mitigating your own downside risk.

Identifying confirmed breakout opportunities

The first step is to scrutinize the technical chart for specific patterns and volume trends that may suggest a potential breakout. One possible way to identify this is to look for consistent price increases leading up to a resistance level or supply zone and increasing trading volume. This indicates growing buying pressure, which may help to generate enough bullish momentum so the asset's price can break past ATHs. Additionally, positive news or developments surrounding the underlying project can strengthen the bullish case. Confirmation is another key concept worth keeping in mind before rushing into a trade based solely on the initial breakout.

To avoid the possibilities of a false breakout that punishes over-eager crypto traders who make their entries prematurely, traders can opt to wait for confirmation. This can refer to a retest of the broken resistance level as support or a sustained price movement above the breakout point.

Entry point and stop-loss

Once you've identified the point breakout, this can act as a suitable entry point. This is typically the point where the price decisively surpasses a previously established resistance level on the chosen chart timeframe. In this context, the previously established resistance level refers to the ATH price of the crypto asset.

Common technical indicators like moving averages and volume can also help with confirming the breakout's legitimacy, indicating a potential shift in momentum towards the upside. As for risk mitigation efforts, you can choose to set up a stop-loss order that's slightly below the breakout level. This is key to limiting your potential losses should there be a false breakout and a sudden reversal in price.

Locking in your gains

Ideally, you should be aiming to close your long position progressively as the price climbs. This can be done by setting trailing stop-loss orders that automatically adjust upwards as the price increases, locking in some gains while allowing for further potential growth. Alternatively, pre-determined take profit price targets can be set based on technical analysis or a specific percentage increase in price.

Trading beyond the breakout

While a successful breakout can be lucrative, it's crucial to remember that ATH prices aren't guarantees of sustained growth. The market can experience significant corrections even after a breakout. Therefore, thorough research on the underlying project's fundamentals and long-term trading strategies are crucial for sustainable success in the crypto market.

Bearish ATH strategy: trading the pullback

While many crypto traders are drawn to the potential for explosive gains during a cryptocurrency's ascent towards an ATH, some adopt a bearish strategy, aiming to make gains from pullbacks that often occur after reaching such peaks. However, successfully trading the pullback calls for caution, technical analysis, and a well-defined risk management plan.

Identifying the pullback opportunity

The first step involves identifying a legitimate pullback. This signifies a downward price movement following a rejection of the previous ATH price and is often accompanied by increased selling pressure and declining trading volume. Momentum-based technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) can provide insights into potential trend reversals, indicating a potential pullback opportunity that eagle-eyed crypto traders can capitalize on.

Confirmation and shorting techniques

Confirmation of the rejection is crucial before entering a bearish trade. One tip is to look out for signs of sustained weakness, such as the price breaking below key support levels or failing to regain momentum after a retracement. Depending on your personal risk tolerance, you can consider short-selling to earn additional returns from the sudden pullback. This involves borrowing the asset, selling it at a higher price, and then repurchasing it later at a lower price to close the short position, therefore pocketing the difference. Conversely, you can make use of derivatives like futures, options, and perpetual swaps to short the asset instead.

Entry and stop loss orders

Entry-wise, a limit order could be placed below the ATH price level to capitalize on the downward trend once a pullback is confirmed. Crypto traders can then confirm the rejection of this crucial resistance level by looking out for signs of bearish momentum and opting to close their short position once buying momentum begins to pick up. To mitigate potential losses, stop-loss orders should be placed above the same ATH price level to limit potential losses if the pullback results in a potential bear trap and the price rises unexpectedly.

Locking in your short-selling gains

When it comes to your exit strategy, we recommend a similar method of setting trailing stop loss orders that automatically adjust downwards as the price falls. This will help in locking in some gains while allowing for further gains made through the asset's price decline. Pre-determined take profit price targets can also be set based on technical analysis or a specific percentage decrease in price.

Trading beyond the pullback

Despite bullish sentiments when approaching ATH crypto prices, trading a pullback can yield additional gains because of the various corrections that can take place throughout a bullish rally. To reap the most from each trade, detailed research should be done to assess the viability of short-selling and whether the risk is worth undertaking.

Final words and next steps

Thanks to excitement in the crypto market, there's an increase in budding traders who are new to crypto and wondering if it's too late to hop on the Bitcoin bandwagon. By understanding the concept of crypto ATHs through this guide, we hope to help newer crypto traders navigate past FOMO and the emotional need to make impulsive trades. As the crypto market is highly volatile, looking at ATH prices alone isn't enough to grasp the market's overall sentiment. By combining the ATH metric with technical indicators, you'll ultimately be able to make the most informed decision possible when deciding to place a trade in the crypto markets.

Keen to give crypto trading a try? Check out our various BTC spot trading pairs or read up more about why Bitcoin is a market leader with our handy Bitcoin explainer.

FAQs about ATHs in crypto

When did BTC last hit ATH?

According to data from the Bitcoin price page, Bitcoin reached its current ATH of $69,040.10 on November 10, 2021.

What is ATH in Crypto?

ATH signifies the highest value that a crypto asset has had since its initial launch. Apart from the value itself, it can also be used in reference to an asset’s market cap. Most coins and tokens hit their ATHs during the bull runs of 2017 and 2021.

Does reaching an ATH guarantee future growth?

Reaching an ATH doesn't guarantee future price appreciation as past performance doesn't necessarily predict future results. Market conditions, project development, and other factors can all significantly influence future price trajectories

What happens after a cryptocurrency reaches an ATH?

Ultimately, there's no definite answer since it can depend on factors like momentum and market sentiment. The crypto market can react in various ways, including a continued upward trend, a corrective pullback, and a sideways consolidation.

Should I trade a coin or token based solely on it approaching an ATH?

Making trading decisions based solely on the excitement surrounding an ATH is inherently risky. Traders should always conduct thorough research, understand the underlying technology and project fundamentals, and assess the potential risks and rewards involved before committing to a trade.