Daily Report – Bitcoin and Market Update (December 11 2021)

HTF 1D:

Daily chart is showing off continuation of what I call a PTSD range which usually comes after heavy price shocks, unpredicted FUD news or abnormal downside volatility. As long as it trades between 42k and 52k boundaries, Im not really expecting much fireworks. That said, it’s quite a wide range pattern hence bringing buying and selling opportunities across the timeframes.

Bollinger Bands analysis suggests that bitcoin is trading right at the lower band support which shows that it’s basically at the lows of statistical volatility. The direction of the bands is downwards in quite an expanded width between 45.7k USD and 61.3k USD levels. As long as bitcoin is trading inside this range, it should stay there for about 95% of the time (4 standard deviations: 2 StDev over the MA20 mean and 2 StDev below the mean). Hence, any wick to the downside below the lower band is usually an abnormal volatility case which can be faded/bought as a dip. In other words, any time that bitcoin slashes beneath the lower Bollinger Band and closes back inside the volatility range, it is a potential reversal/bottom any similar occurrence serves as a good buying opportunity.

On top of that, the price is sitting at the long-term 50-week average support converging with the lower Bollinger Band for additional confirmation. Shorting into this long-term double support area is rather not a good payoff. It doesn’t mean it’s impossible to make money shorting micro timeframes into the support. It means the reward to risk is simply not worth it.

MA20 (53.5k USD) combined with aVWAP (55.8k) suggest that this is the short-term resistance cluster under which bitcoin is impacted by more bearish activity. Once broken and closed a strong day or week above this cluster, it’s a solid upside breakout signal.

MTF 4H:

MTF picture is in local downwards trend with the excessive downside wick clearly marked between 42k and 47k regions. The longer the wick, the more technical significance it brings. It reflects on the buying orders that hit right there aggressively with little liquidity. The less liquidity (after flushing it on the drop before), the easier it is to move an asset in price up and down with smaller amount of money. One way or another, the wick shows where the buying zone was defined by whales. That means that selling into 42-47k region most likely is giving your sells to the buying whales based on the technical analysis.

AVWAP levels anchored at the high (69k USD) and low (42k USD) define fair price of bitcoin from the medium-term and short-term points of view respectively. Short-term fair price is 48887 and medium-term fair price where bitcoin should be trading at is 55860. It’s trading at the short-term fair price and way beyond the fair medium-term price. This suggests that BTCUSD is a subject to trade around it’s flat fair mean between 47k and 52k for short-term most of the time and soon to recover into 55860 region right after short-term instability recovers.

Short-term wise it is possible we see more FUD news coming out (they usually release it AFTER prices drop to compress liquidity in the downside area, not before the drop) and flash wicks into 42-47k area which should be quickly bought up.

LTF 1H:

Short-term picture is showing a convergence of volume profiles marking out a few significant levels to watch.

Like I mentioned on my yesterday’s webinar, the drop alone from the 57000s region down to 42000s happened on very low volume which aggregated the most sells and liquidations at 53000s and virtually no volume displayed beneath 52000s. This may be a confirmation that the market technicals at the time of the drop presented very thin order book and fact that market was not prepared / was not expecting that low levels. Lack of selling volume beneath 52000s is significant here. If the market had been to reverse and end the bull market truly, I would expect to see large selling volume aggregated in the lower part of the range. This overall seems to be more a thin order book issue than real bearishness, especially that price jumped back immediately 12% within the same hour.

Further analysis of the volume profile after the drop suggests a convergent aggregation of volume in two regions: 50-51k and 47.3k-49.3k. The biggest amount of transactions happened inside these regions which suggests that those have the highest chances to act as proper resistance and support regions once reclaimed. Until proper reclaim (a strong day or week close above), price action is expected to oscillate around these levels in the PTSD range until the local trend pulls back towards 55-56k levels as mentioned in the previous chapters.

Short-term MA200 is positioned at 49500s while trending down consequently. It suggests that short-term trend is down on average and as long as it is this way, BTCUSD is a subject to fear and bearish advantage/impact. Once market action breaks above to establish trading over 49500s to later close a day or week through at least 50.5k USD, the market is supposed to continue upwards towards 55-56k in the short-term.

FEAR/GREED INDEX

The index hits the lows of 16 points on the scale which has been virtually unseen since 29-30k regions of June-July bottoming process. Similarly, based on the sentiment we can also induct that this reminds a bottoming process.

The crowds are always right in the middle of trends and always wrong at the extremes (unless unexpected news disturbs of course). The more extreme sentiment and poralized opinion they present, the more wrong they get about guessing the top or bottom.

Historically speaking, anytime the fear/greed index tilted below 20 points on the scale, it has been of great buying opportunity. This is NOT a timing indicator (like RSI is) though. It is NOT intended to let you pinpoint a top or a bottom. It’s working to show off when the market usually gets it wrong and when the market turns into favorable buying or selling opportunity.

This sentiment suggests its a massive buy for medium-term. If you look at the cyclicality of the oscillations of the index over past few months, one can acknowledge a month long average time for bitcoin to swing from the one extreme to the other. It’s fair to expect imo that it might be a good buying opportunity for what’s set for us in January 2022.

Bitcoin: Mean Hash Rate (168h MA)

This onchain metric is the average estimated number of hashes per second produced by the miners in the network. It is a computational network’s engagement or overall activity.

Importantly, it has just marked a new all time high value at 173.21M TH/s (Terahashes/second) for Dec 10 2021. It is a massive confirmation that onchain is boiling up behind the scenes which is building quite a heavy divergence between bullish hashrate activity and bearish price action. I’d refer to it as a “bullish divergence” as in confirmation that short-term price doesnt reflect bitcoin’s fundamental/onchain growth and hence makes it under valued for the next months potentially.

This is a significant piece of information which is yet another confirmation that after short-term instability, range and indecision, the market can be fairly expected to rise soon after.

Trading through the noise is very hard challenge and the CMT studies may suggest that for vast majority of the traders doing little to nothing after experiencing price shocks most often works best. At all times, though, stay protected and do not over leverage or over invest. More help and explanations I brought during my yesterday’s webinar. If missed it, catch the link below. God bless!