Daily Report – Bitcoin and Market Update (December 20 2021)
Weekly chart zoomed out points out directly at a long-term nondirectional, sideways movement of the past 9 months of market action. Rectangle with slight deviation at the lows followed by a slight deviation at the highs is of the base size of ~40k USD. Based on the measured rule, a breakout in the direction of the prior trend (upwards) could be expected to produce the same nominal thrust of 40k USD added on top of the breakout level (~65-70k USD). This is a technical setup for long-term targets of $100k+ USD, but it doesn’t need to be immediate necessarily, as the time has already proved.
Based on the 50-week average trend, the momentum (slope) of the curve has decreased significantly, while still making higher marks. The MA50 is still printing an upwards trend narrative, although, the longer BTCUSD takes to bounce back into 60000s USD area, the more fear and/or uncertainty it causes, if we were to apply basics of behavioral finance. Local weekly sessions are not overly respecting for the MA50 support, but similar case was shown directly in July 2021 right before the major upside pump.
Level wise, BTCUSD has been trading inside 50-61.8% Fibonacci retracement zone or a pocket for the past few weeks. This is usually arbitrary zone for medium-term retracements to end there. Therefore, it seems that either bitcoin is supposed to reverse anywhere between 50-61.8% levels anytime and any day soon, or it risks more technical fear and potential drop into the range lows area (and still maintain primary bullishness) of low 30000s USD. Accounting other market factors it rather seems to me that a throwback into low 30000s would be too optimistic for the bears and could rather be front run in my opinion.
Daily chart on CME futures shows the 3rd instance of BTCUSD trading beneath its 200-day average trend in the last 6 months. This time, though, the average trend smoothed is of lower momentum and rather flat trajectory than a certain upwards orientation. This may imply a sideways or low momentum movement may continue for some time in a range bound between low $40000s and high $60000s. The average trend going flat is not helpful in the short-term neither for bulls nor for bears. It defines the main narrative as being non-directional and hence not supporting any side by definition – just swinging back and forth between levels.
CME breakaway gap 32930-34475 USD might only be filled in extraordinary occurrence with strong exogenous impact involved. In other words, technically speaking, the breakaway gaps do not get filled easily, unless external FUD factors cause flash crashes. With a lot of omicron COVID variant, Chinese Everagrande FUD going on, along with overall equity markets wobble (local VIX soar; put/call ratio high – charts below), that is a scenario that we can’t exclude. While many people in the overly fearful sentiment would expect the CME gap to get filled, it may easily happen they get front-run while in heavily oversold conditions.
Momentum and trend per Birbicator on the bottom points out heavy state of oversold market action that’s been lasting for a month already – way longer presence than in previous 30k and 40k bounces in July and September accordingly. Historically speaking, anytime BTCUSD has traded in so oversold conditions, soon after we have witnessed significant upwards relief rallies. Front-run scenario would make a lot of sense due to onchain reasons as well combined with a technical short squeeze. This might be a potential case study of a scenario too good to be true or realize.
The middaily chart is showing a clean non directional movement in sequence of back and forth swings in a somewhat contracting range.
Based on BPRO, the range bound derived from standard deviations implies that the main price action territory is set between $43500 and $52500 and, unquestionably, bitcoin is trading closer to the Low Momentum Band defining volatility-based support, while below the BaseLine. The local, narrow range bound is 44.5k and 47.3k USD and it’s relatively likely BTCUSD would touch the lower bound.
CTF Trailer shows invalidation of short-term bearish tendencies at 51177, whereas HTF Trailer at 57394 is the key level for long-term bitcoin’s perspective. Once a successful day/week close through 57394 occurs, it implies the reversion of medium-term downwards trend.
As the range has been becoming more and more narrow over the past days, I’d personally expect a more explosive movement unfolding at any time during this week, likely before Friday. That move could reach either of the extreme Momentum Bands – $43500 or $52500. Regardless of whichever comes first, it’s safer bet to expect reversal soon rather than gamble for shorts right around a support.
MTF picture has been pulsating in a sideways for the past two weeks, as clearly displayed by BPRO Momentum Bands.
Local CTF Trailer trend thesis is invalidated in favor of bulls only with a strong daily/weekly close through 48264 USD. HTF Trailer resistance at $55481 defines a key resistance level that once broken implies a full comeback of bulls with the new highs expectations.
Average volatility for 4H chart is set between $44000 and $50000 and that’s where the most of the next day’s price action should be happening.
The hourly chart shows a set of BPRO based indications with several important levels.
HTF Trailer confirms invalidation of short-term trajectory with a solid break through 48264 USD level. Until that happens, BTCUSD is supposed to rather continue trading in the narrow range bound.
Additionally, BPRO Level Lines suggest a support at 45310 and resistances at 46479, 47077, 48944, 49783 and 51061. In this case, those levels could suggest a level-to-level trajectory. In other words, if a Level Line is tagged, the subsequent one (in the move direction) becomes a default target.
The BaseLine is currently downside oriented suggesting that last few days have rather been controlled by the bears with tiny advantage, although irrelevant for the higher timeframe directions.
All things combined, this sideways for the past days have mainly been nothing else but a random market noise. This type of market action offers exceptionally high level of uncertainty, fake breakouts, traps, liquidity hunts, premature swing cuts and overall randomness. It does not hence have much to do with trading. It’s more a gambling strategy (Martingales or Anti-Martingales) to be applied in such instance. Not recommended, though.
Bitcoin: Net Unrealized Profit/Loss (NUPL)
Just to remind, 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 NUPL at approximately 0.487 ratio is at the same levels to when BTC was trading at in the late September, at a little bit lower levels of 39-40k USD.
Quite a heavy long flush had already happened so there’s not many longs to flush anymore to decrease the leverage of the market. It rather seems to be a bottoming process – as any process, it is taking time.
Long-term market reversals and bull market tops have always occurred only over 0.75-0.8 NUPL ratio, which has never happened during this bull market cycle. It’s an additional reason to believe, to my mind, that the bull market is NOT over.
Bitcoin: Number of Active Addresses
Per glassnode: The number of unique addresses that were active in the network either as a sender or receiver. Only addresses that were active in successful transactions are counted.
The 168h mean suggests local tiny bullish divergence, although I’d not base any trades just for that reason. Overall tendency is in expanding sideways (higher highs, lower lows) for the entire time that BTCUSD has been sinking in the -40% retracement.
The 50-day mean has become flat, which backs up rather the overall sideways thesis. The market is waiting on the sidelines both per price and per the onchain.
Another day in paradise. Extreme fear of 25 points on the scale of the index. The market has been sinking in overly bearish and extremely fearful sentiment for the past week and month alone. Historically, extreme fear has always been of better opportunity for the buyers than sellers and I’m expecting nothing different this time. It seems to me it’s just a bottoming process with clear instance of lost hope for recovery. This is usually when the recovery comes soon after.
Besides, the crowds are usually wrong at the extremes. Selling the support levels here for bitcoin would imply selling bitcoin cheap. It makes a lot of sense to consider this range of fear to be an accumulation range (also backed by illiquid supply of strong hands holders accumulating). It’s not a timing indicator, but it tells when BTCUSD is trading cheap or expensive. Here bitcoin is apparently cheap enough based on the historical reference. It’s safer to expect that bears do not have much time left here in my opinion.