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Feb 7, 2022 13 min read review


BSI – A BITCOIN INDICATOR FROM IVAN ON TECH


💡
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On Black Friday, I got an email from Mr. Atomic Clock himself – Ivan on Tech. He
was promoting a discount on his newly developed crypto-related indicator named
BSI (Bitcoin Strength Indicator). A special black-Friday-only offer for the new
BSI indicator would give me access at a discounted price of $397 /year compared
to the regular price of $697 /year. It seemed like a great deal, so I took Ivan
up on the offer. Here is a short description of BSI (taken from their website):

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Enroll now for 50% off every year Now $697, Actual Value $1404 […]
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BSI – WIN IN THE NEXT BULL MARKET

Now you have the chance to get your hands on Ivan on Tech’s own BSI indicator.
BSI is a revolutionary, one-of-a-kind indicator combining both technical
analysis and on-chain analysis using data from the Bitcoin blockchain.

With BSI, you get an EXCLUSIVE insight into the crypto market, making it
possible for you to act before everyone else.

When you buy BSI today, you get access to all 3 BSI components 👇

BSI On-chain Sentiment

BSI Short-Term Trend

BSI Cloud

Make sure that you get the most out of the next bull market, a potentially
life-changing event. Get BSI Today!

It all sounded very promising, so I was excited.

Price: $897 / year (“normal” price $1,697 /year)

Refund period: 7 days

Creator: Ivan on Tech

Platform: Tradingview

So we have covered the price point. If you plan to purchase BSI, you can pay by
credit card, PayPal, or with crypto. There is a refund period of 7 days. You get
seven days to play around with the indicator, and if you aren’t pleased, you can
ask for a refund. After you pay for the indicator, you will need to send an
email to Ivan on Tech support, with your tradingview username, for them to
propagate BSI to your tradingview account. A free tradingview account will do
just fine. There is no need for a paid tradingview subscription to utilize BSI.
After you have sent your username to Ivan on tech support, it can take up to 24
hours before the indicator is added to your account. Once added to your account,
you can find it on tradingview in the “indicators and strategies” section under
“invite-only scripts”.


BSI INDICATOR


What exactly is the BSI indicator? I am not sure what the acronym is short for,
but It is short for Bitcoin Strength Indicator and it is a proprietary indicator
developed by the team behind Ivan on Tech. Ivan is notorious for his daily
youtube videos posted at precisely the same time every day – like an atomic
clock (almost 🙂 ). He is also the founder of Ivan on Tech Academy, an online
course in the blockchain and crypto programming space.

The BSI indicator is an indicator specifically made for bitcoin (but can be used
on any asset available on tradingview), and will show you:

On-chain Sentiment
Know what’s going on on-chain, before it plays out in the chart.

Short Term Trend
See when the short term trend switches direction. The lines can be used as
support & resistance.

Cloud
Find long term support in a bull market, and identify when the long term trend
shifts.

In addition to this, you also get a 30 page BSI manual.

Here is what it looks like in action. (click the image for full size)


BSI INDICATOR IS NOT…


The BSI indicator is not a strategy. Like I mentioned in the market god review,
the BSI indicator is precisely that – an indicator. It is not a strategy. As the
name implies, an indicator will indicate where the price may be going in the
nearest future. An indicator is an alternative reflection of price that some may
find easier to decipher than the price itself. With that being said, any
indicator, along with the BSI indicator, will not tell you exactly when to enter
trades, how much of a loss you should accept, when you should take profit, etc.
But it (the BSI indicator) will give you an indication of all these points.

It is up to you to find the optimal way to utilize this information. That may be
easy and of great help. Maybe it will be difficult and clutter your decision
process even more. Because of this, it isn’t easy to give a fair review/rating
to an indicator.

I think it’s very fair to say that the most crucial aspect is how an indicator
is utilized. There are, of course, some indicators that are more reliable than
others. So is BSI one of them? Let’s take a closer look to find out.


ON-CHAIN SENTIMENT


On-chain sentiment is the first-mentioned part of the BSI indicator. This part
is shown below your tradingview graph/candlesticks as long vertical lines in
color variations from light red to dark red and light green to dark green. But
let’s first talk about on-chain analysis, which is the foundation for the
on-chain sentiment indicator. (click the image below for a full size)

On-Chain Analysis is a new type of analysis that traders and investors have
never seen before now. Until the inception of bitcoin, any trading related
analysis has either been categorized as fundamental analysis or technical
analysis. On-chain analysis ticks the third box. On-chain analysis is the
process of analyzing all the different elements on the blockchain to generate
clues as to what the price may do in the nearest future.

There is a good article Sid Shekhar over on MasterTheCrypto.com where he writes
the following:

First off, what do we mean by on-chain data? To put it succinctly: All data that
is natively stored on the blockchain.

This data includes (but is not limited to):

Details of every block (timestamp, gas price, miner, block size etc.)
Details of every transaction (The ‘from’ and ‘to’ addresses, the amount
transferred in the transaction etc.)
Smart contract invocation and usage
In other words, the on-chain transaction volume is being used to judge whether a
given cryptoasset is actually being used.

We believe we can go one level deeper.

Instead of just crudely measuring the overall usage of a cryptoasset network, we
think we can use on-chain transaction data to figure out who are the entities
that are actually using a given cryptoasset.

This allows us to examine and learn from their on-chain transaction patterns –
leading to deeper and more nuanced insights to fundamentally value the
cryptoasset in question.

I don’t know what the on-chain sentiment from the BSI indicator shows, exactly.
Still, I got a feeling it is related to comparing the value of the network with
the volume of transactions recorded on the blockchain – NVT. In this article
from Interdax they write the following:

By comparing the value of the network with the volume of transactions recorded
on the blockchain, we can identify when a cryptocurrency is overvalued. When the
value of the network is not justified by the volume of transactions, the NVT
ratio is relatively high. When considering the transaction volume, if the
network value is unusually low then it may suggest that a higher valuation is
justified. The NVT ratio is often compared with the Price-Earnings ratio for
equities and is applied in a similar way to find coins to buy, hold or sell


I have tried to compare a freely available NVT indicator on tradingview with the
vertical lines from the on-chain sentiment data from the BSI indicator. There
seems to be at least some overlap here. But there are also quite a lot of places
where they differ. Which one is most accurate? Once again, that comes down to
how the indicator is used. Click on the image below to see a comparison of the
BSI On-Chain Sentiment and the NVT Signal With RMA and thresholds indicator
(which is free on tradingview)



There is also an interesting article over on the Ivan on Tech blog about the
topic of on-chain analysis. It also covers a bit about NVT but also a couple of
other interesting points;

Unspent Transaction Outputs (UTXOs)

Realized Capitalization

Market Value to Realized Value (MVRV)

So called “on-chain analysis” is an emerging field in crypto, designed to help
traders enhance their strategies. By leveraging information found on the public
blockchain, on-chain analysts hope to better predict future market moves. These
analysts scrutinize blockchain data such as transaction details, block details,
and smart contract info to gain valuable insights.


My best guess is that the On-Chain sentiment in the BSI Indicator is using a
combination of all the elements mentioned above.

So let’s get back to the BSI indicator. In the On-chain sentiment, green
indicates the price is about to bottom out, and you should expect the price to
start going up. Red suggests that price is about to reach a peak, and you should
expect the price to start going down. The colors go from light to dark red and
light to dark green. A darker color suggests a higher likelihood for the signal
to be valid. Another note is that the color is only visible on the daily
timeframe. It simply won’t be visible on the chart on lower timeframes.

My personal experience with the On-Chain sentiment is minimal, as it simply
hasn’t flashed any colors on the chart since I applied the indicator. However, I
looked at some historical examples, and if we go back to 2017 for the all-time
high around 20K, it started to flash a dark red color 13 days before the
all-time high was reached. So the signal was valid, but it was 13 days early.

The On-Chain sentiment is not an indicator for short-term daytraders, but it may
prove valuable for swing traders. It is also apparent that you don’t want to
execute trades solely based on the on-chain sentiment, but it may be a useful
tool for an existing strategy. The way I currently use this is in the following
simple manner; there is currently no indication on the on-chain sentiment- hence
I would expect any rapid and extensive move to the downside to be shortlived
moves that will make retail traders panic sell, but ultimately go back up within
a relatively short period. So far, this has worked very well over the last
couple of weeks. Will it continue? Time will tell.


BSI SHORT TERM TREND


See when the short term trend switches direction. The lines can be used as
support & resistance.

This is probably my favorite part of the indicator. It consists of four parts;
support levels, resistance levels, bullish flags, and bearish flags. The BSI
Short term trend works on all timeframes and seems very reliable, especially on
higher timeframes. In works in the following manner; when a bullish flag is
posted on the chart, a dynamic support level is listed below the price and will
continue to develop as new candles are mapped. If there is enough momentum to
push the price down through the support level and close a candle below it, a
bearish flag is posted, and a dynamic resistance level is posted above the
price.

On tradingview you can download chart data, and if you have the BSI indicator
activated, this is reflected in the file (the time and price level of where the
bullish and bearish flags are posted). This allows for easy (but limited)
backtesting without the need to code a strategy in tradingview. With some
relatively simple excel work, we can get an idea of how well this indicator
works. I am currently working on this and will follow up with a new post, once I
have something interesting to share.

For now, I will stick to what I have seen from a chart perspective – and it
looks promising. On a 5-minute timeframe, you will get many bad entries –
especially when you include financing fees and funding charges. But once we move
to higher timeframes, these levels seem quite accurate, especially on the hourly
timeframe and up.

As with any indicator, one thing to note is that you can, and will, get
conflicting signals on different timeframes. Very often will the 1-hour
timeframe show a bullish signal, while the 4-hour will be bearish. Which one do
you go with? This is where the strategy part comes into play. You need to
develop a strategy, and stick to it. The short version is that if you execute a
trade based on the 4-hour timeframe, risk management should reflect this. The
same is true for any other timeframe.

I think some clients of the BSI indicator will be tempted to go with a simple
strategy like the following: Long at the print of a bullish flag, and short at
the print of a bearish flag. From the looks of the chart on the 4-hour time
frame, this could work. But you need to develop a plan as to where you will stop
the trade out and where you will take profit. If you plan to reverse the trade
at the next signal, you will need to work with a dynamic stop loss and take
profit level, which poses a bunch of new issues from a risk management
perspective.


SIMPLE STRATEGY SUGGESTION WITH BSI


Suppose I was to go with a strategy somewhat similar to the above. In that case,
I would prefer to go with a fixed stop-loss around 300 USD above or below the
first print of the new support/resistance level and take profit at chart
patterns indicating a possible reversal. The stop loss would, per definition, be
dynamic, but only if the trade moves into profit territory (trailing the SL,
that is). If the trade moves into negative territory, stop-loss will remain at
the same level (due to the nature of the BSI Short term trend). A strategy like
this would help catch the big trends, avoid lots of bad entries because of the
higher timeframe, and be cheap from a commission perspective. However, we may
end up getting in a bit late, as we need to wait for the close of a candle to
get a valid signal. If we get in at the close of a momentum move, we should
expect the first period to take us into a preliminary loss (because pullbacks
are expected after a momentum move to either side). This is, of course,
something that should be tested with a demo account before going live.
Finetuning is without a doubt needed, but I do see how something like this could
work.

Another way to trade with the BSI indicator is simply to trade all the bounces
on the support and resistance levels on the 1-hour timeframe with a fixed stop
above or below the printed support or resistance level at the time of entry.
From the look of the charts, this seems to provide very accurate entry points.

Keep in mind; this is nothing more than support and resistance levels. There are
lots of free alternatives on tradingview, or you could draw your very own
levels. With that being said, BSI indicator does seem to print levels with
significance that often makes the price bounce right at the posted levels. I am
personally a big fan. But everyone has their favorite. I have gone through the
top 20 free support and resistance indicators on tradingview, and in my opinion,
none of them comes close to the accuracy provided by the BSI indicator.


BSI CLOUD


Find long term support in a bull market, and identify when the long term trend
shifts.

Finally, we have the BSI cloud part of the BSI indicator. BSI Cloud is another
support & resistance indicator. BSI Cloud is not shown as a line but rather an
area that looks somewhat like a cloud on the chart. BSI Cloud is visible on all
timeframes, but we are told that this is to be used on larger timeframes (and
based on the examples in the guide, the daily chart is the one to go with).
Based on what I have seen on the charts this far, I would prefer to utilize this
on the 4-hour timeframe. BSI Cloud seems to be particularly useful when we see
quick sudden strong moves (especially to the downside). There are many
historical examples of sharp and large spikes down, where the price comes right
down to the BSI Cloud area and then continue back up from there.

I can see this as a handy tool for swing traders and maybe even daytraders who
are afraid of getting stopped out on such moves (scam wicks, spikes, whale
moves, fakeouts, false breakouts, and all the other names they go by).


CONCLUSION


What is the conclusion on the BSI Indicator, then? As mentioned above, it is
challenging to give a fair judgment to an indicator. It all comes down to how
you use it. With that being said, some indicators are more reliable than others,
but I think it’s fair to say it looks like BSI may be one of the better ones.
It’s simple, easy to interpret, and highlights levels of importance for both
short-term and long-term trades. I personally think it can be of great help for
spotting solid entry and exit points.

Is it worth the price? Is the BSI indicator cheap or expensive? That is not an
easy thing to answer, and it depends on several different things. How large is
your account balance? How much do you plan to enter with on each trade? How many
trades? Did you trade solely based on the indicator or other factors as well? I
could go on and on. There are lots of free indicators on tradingview, so in that
perspective, BSI is very expensive. Do the free indicators on tradingview
provide the same amount of information and accuracy as BSI? Maybe not, and so
the price may be very fair. With a decent-sized account balance, it won’t take
many profitable trades to make up for the cost of the BSI indicator. But it
won’t take many losing trades to double the price as well.

Do I recommend the BSI indicator, and should you get it?I think one key element
to keep in mind here is your trading style. Some people love using indicators,
while others prefer to trade solely based on price action. I haven’t used the
indicator enough to give an honest recommendation, and even when I have used it
for a long time, I probably won’t do it anyway. What works for me may not work
for you.

The good news is that you don’t have to wait for my recommendation or anyone
else. You can take the BSI indicator for a seven-day trial. Then you can play
around with it all you want. If you like it, keep it. If you don’t, you can get
your money back. Support from the Ivan on Tech team is top-notch, so I have
complete trust in them honoring this deal.

If you have any experience with the BSI indicator, I would love to hear your
thoughts on it. You can leave a comment below.

Get the BSI indicator here.




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