Daily Report – Bitcoin and Market Update (August 31 2022)

HTF 12H:

The middaily chart displays an attempt of Bitcoin to form a base in the 19500-20000 USD area. However, it seems wobbly.

The downwards breakouts following the wedge pattern, and the bear flat, seem to have mostly expired their technical targets, which were projecting a support area in the 19000-19500 USD zone.

The CTF Trailer continues to display a bearish advantage, as the main resistance $21463 remains unbroken. As long as it does, the bulls are not in control, and the trend has more bearish sentiment. As a result, there is a window for BTC to drop to lower prices, near the June lows.

MTF 4H:

As BTC nears the monthly close, coming later today, there is a short-term consolidation pattern forming.

A sideways movement moves between the 19500 USD floor, and the 20500 USD resistance area, giving a 1000 USD base size.

The closer BTC gets to the monthly close, the more volatility and risk may appear, locally. An upwards breakout, over the CTF Trailer Stop $20700, may result in a technical, measured move as high as 21700 USD.

However, a failure to do so may imply internal weakness in the market, and higher chances of persisting lower, below the 19500 USD support.

In such a case, the correction would deepen even more, boosting the chances of a 17.5-25k USD pattern failure, and a more violent sell-off, where BTC falls off the cliff below the 17500 USD levels.

LTF 1H:

The hourly chart displays an instance of a sideways pattern, as mentioned in the paragraphs above.

BTC is now trading on the higher end of the pattern range, which may be associated with a resistance.

Unless the 20700 USD level is reclaimed before the end of the month, BTC may follow through lower, and extend the selloff into the 17-18k USD range.

FEAR/GREED INDEX:

The “extreme fear” saga continues to deliver. The most recent BTC slide into the 19500 USD area, has brought a point down to the sentiment index. Now, at 23 points on the scale, out of 100, there seems to be more conviction among the bears that the market is going to continue lower. However, it is worth noting, that the more extreme the market sentiment gets, the more farfetched (less probable) their thesis is going to be. Traders suffering from representativeness bias will extrapolate from small samples. For instance, by watching the most recent tail to the decline, they will automatically assume that the same pattern will continue to populate, so that they would expect further downside decline. While it may come true within short-term, in the longer-term perspective it often makes better odds to take a contrarian position, and decide about the prospect of purchase when there is a selling climax.

Bitcoin: Net Unrealized Profit/Loss (NUPL)

For the on-chain data, the NUPL ratio is now at -0.09, back in the negative territory. It suggests that there is, on average, a net unrealized loss in the market. There is no way to know whether or not or when the bear market bottom comes. However, it may be beneficial to keep eyes on the NUPL ratio. Typically, the more negative it turns, the better the buying odds become to be profitable.

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