Daily Report – Bitcoin and Market Update (December 13 2021)
Weekly session closed as a spinning top candle of low volatility and high level of indecision about the next moves or short term directions. This is quite a typical market behavior after strong price shocks or moves or abnormal volatility come in unexpectedly. This is a result of traders waiting on the sidelines to decide about the right guess for what the market consensus is at this time.
Technically speaking, the session’s lows bounced off 50-week average price at 47.7k USD although due to the nature of PTSD range, it was not really a spectacular bounce or at least not as much impressive as the few-minute bounce from 42k USD to 47k USD or beyond 13%. As long as bulls keep closing the weekly sessions over the MA50 mean, there’s no technical risk of any downwards escalation.
Usually volatility (and risk) is the biggest at the reversals and similar candles to the ones we saw in March 2020 or May 2021 should bring a fair assumption that the market would react in a similar way after some time of sideways of indecision. The total retracement of 40% is at the extreme records of regular MTF corrections.
The only risk I see may potentially realize is that this non-technical (exogenous) correction may start being technical. We could say that at times the market only needs tiny push in the right direction and the rest will follow as a snowball or domino effect. If that’s the case and we see a strong downside week close below MA50, it may works as a self-fulfilling prophecy which in combination with thin orderbooks and low liquidity may all together result in bitcoin retesting 28-30k lows regions, backed by March 2020-based aVWAP support. As mentioned during my Friday’s webinar, even that occurrence would not be powerful enough to invalidate the bull market – as long as the market closes candles above 28.8k USD level, it is a technical upwards trend and there is no way over interpret this. It’s fairly simple sequence of higher lows and higher highs that defines an upwards trend.
In case of global military conflicts emerging, war declarations, presidents assassinations, global cataclysms or any other unpredicted news to trigger a price shock, the next support based on volume ever since the bull run started is 23526.
Technical analysis suggests that there is no reason to claim that bull market has ended or that the upwards targets are not to be resumed after period of choppy sideways.
Daily chart is showing a continuation of a local downwards trend defined by sequence of lower highs and lower lows on lower timeframes. We’re though missing a proper upside pullback to define a lower/higher high relative to 69k USD highs.
As mentioned in the past, Bollinger Bands give the bandwidth of 4 StDEv (standard deviations) around the 20-day mean which with certain assumptions result in 95% of the market action happening between the bands and only 5% of the time outside the bands. This suggests that because the 5% outside the bands time is a rare occurrence, it is usually a powerful indication of a potential trend reversal. It is fair to assume then that BTCUSD should be expected to be found between 45k USD and 60.5k USD levels for the 95% of the time in the upcoming weeks. This suggests and lays fair expectations regarding the volatility and ranges in the near future. Bitcoin is positioned right over the lower volatility band hence panic selling at the volatility lows offers rather poor risk/reward ratio. It usually makes much more sense to buy near the volatility lows (lower Bollinger Band) and sell near the volatility highs (upper Bollinger Band).
MA20 is showing a fair averaged price of bitcoin’s trend around 53k USD and mean reversion suggests that sooner than later bitcoin should be trading around there, regardless of what happens below the mean. It’s trending downwards and because 20-days is under short-term category (below 3 weeks) then it should be interpreted as a downwards short-term trend of short-term implication. Short-term movements rarely ever have long-term implications. As long as the direction is downside-oriented, the bulls are not in control on average. Break above and close the day/week through MA20 would be a potential reversal confirmation and strength reclaim.
The middaily chart shows off a couple of significant levels based on the technical analysis insights.
Firstly, there’s downwards trendline which often works as a self-fulfilling prophecy anchor and reference for the traders for what’s bullish or bearish. Currently the level marked by the trendline as a resistance is at 53.3k USD. Positive breakout day through the trendline could be a potential confirmation for the bottom reversal.
Secondly, there is a set of three aVWAP levels marked in the chart in orange. July’s lows-anchored shows an averaged price of bitcoin based on price and volume to be at 50697 USD. Local 42k USD – anchored aVWAP gives a reference of fair price at 48861 USD as the price is developing inside the range. There’s also the third aVWAP, anchored at the ATH peak flashing 55278 USD, which is convergent to the trendline area and hence 53.3k USD to 55278 USD could be considered a resistance cluster, that once broken to the upside it may bring a more explosive movement.
As long as the market is trading below the averages (fair prices) then it is considered under valued. The further to the downside it deviates, the better buying opportunity it becomes.
That said, until the proper breakout with a strong day/week close through 53.3-55.23k USD supply cluster the bulls are not in control and the market is subject to downside volatility and/or choppy PTSD sideways range.
MTF picture shows off an analysis of volume profiles applied to the main swings on the market in the last 2-3 months combined with trend analysis of MA200.
Volume profiles show the largest volume spikes at two main shelves working as support/resistance clusters relative to the price position. As long as price trends below these clusters they work as resistances and in the opposite case, it’s supposed to work as support zones based on the polarity change principle. Local resistance is set at 48.6-49.3k, while the MTF resistance cluster is at 56.5-57.8k. When the lower one is broken and reclaimed with a strong weekly close above it activates the upper cluster as the next technical zone to look at for resistances with local volume spikes at 53-54k region.
MA200 shows off MTF trend direction which is downwards. Currently averaged price of bitcoin is at low 56000s which converges perfectly with the lower part of the volume-based cluster. This confirms that 56-57.8k area is one big supply aggregation and until it’s reclaimed properly and MA200 keeps declining, MTF bulls are not in control.
The hourly chart shows off the largest volume of transactions happening around 49000 USD level which acts as a technical “magnet” or support/resistance level.
MA200 has stopped trending down and started going sideways as the result of PTSD range between 42k and 52k USD. It suggests it’s fair to assume and expect choppy sideways continuation between 42k and 52k USD for most of the time, perhaps even until the year ends.
That said, the scenario where bitcoin drops to 42-45k USD region, it’s a technical based opportunity to buy.
Range trading strategies are as follows:
- Inside Range Trading – buy range lows, sell range highs
- Outside Range Trading – buy upside breakout (retest), sell downside breakout (retest)
- Do not trade the range at all – wait for the trend to come back.
The index hand points at fear and extreme fear interchangeably. Extremely bearish sentiment favors upside reversals while extremely bullish sentiment favors downside reversals and profit taking.
Based on historical records and the way the fear/greed index works, current levels are way more a buying opportunity than a selling opportunity.
Crowds are usually right in the middle of trends and usually wrong at the extremes. It’s not a timing indicator so it’s not fair to expect it to pinpoint a top or a bottom ever. Instead, it provides valuable insights for what is considered to be “cheap” or “expensive”.
Bitcoin currently is “cheap”
Bitcoin: Net Unrealized Profit/Loss (NUPL)
As glassnode explains, Net Unrealized Profit/Loss is the difference between Relative Unrealized Profit and Relative Unrealized Loss. This metric can also be calculated by subtracting realised cap from market cap, and dividing the result by the market cap.
Currently at 0.48-0.51 zone which marks significant over-extension decrease vs the highs of H1 2021.
Per the NUPL indications and the fact bitcoin has never broken through NUPL > 0.75 during this cycle, it is fair to assume that the bull market has not peaked just yet. Many traders choose short-term gratification and are often sad that the market does not as fast as they imagine or want to see it do. Those who are long-enough in this game though highlight (too often to ignore) that the time factor and patience is what brings the success into their investments.
Although it’s different reality than the one I assumed and/or planned to see in June 2021, I have no choice but respect the market taking more time to unfold the same assumptions.
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