Daily Report – Bitcoin and Market Update (December 31 2022)
The weekly chart, now – during the last day of 2022 – reveals the entire year’s story. It’s been a year of the bear.
There’s been a lot of damage, as BTCUSD has declined 77% from the peak.
With the historical cycle troughs at 80-90% drawdowns measured from the peaks, this puts the current BTC setup in the bottom-ish territory. It does not guarantee in any way that Bitcoin may not drop a cent lower. If I were to guess, the historical seasonal pattern of January and February for Bitcoin might bring a little more downside.
Having recently rejected the 18500 USD breakout attempt, the triangle objective at $12000 is where traders’ eyes may rest.
The 200-week average price is around $24400. Now, at $16500s, BTC is heavily underpriced.
With the recession likely to kick into 2023 and dominate the first half of the year, there may initially be a little more headwind for BTC to unfold to the upside at a full pace. For that, it’s better to expect a slow start with accumulation breakouts in Q1 2023.
The speculation is about guessing the future directions. However, the trend-following tactic suggests it’s better to follow the trend. For now, the trends are still bearish. Because they tend to persist, BTC is more likely to continue lower than to reverse all of a sudden.
Manage your risks according to your preferences.
The daily YTD chart reveals that the average 200-day trend does not seem likely to reverse anytime soon.
Monitoring the 200-day moving average may help set the expectations. It is a primary market trend. If it’s descending, it’s a bear market territory.
Currently, Bitcoin is priced low compared to its “fair” reference price of $19700. It’s helpful to use such anchors – especially since many aspects of technical analysis are self-fulfilling. If enough traders keep track of the said 200-day trend, they will likely make similar and predictable behavioral decisions.
Bitcoin is trapped in a technical range of $15500-18300. As long as it trades within the pattern frames, it’s not likely that a more explosive movement will come.
Bitcoin Average Mining Costs
Presently, the miners are at a break-even levels, in terms of their mining business profitability. This puts the miners in a slighly more convenient situation, as they don’t suffer from such big losses.
As long as the price of Bitcoin stays low, and the electricity prices (defined by the $XLE trends) are considerably high, this creates supply pressures and potential selling forces, as some smaller miners may drop out and close down their mines, aiding to decrease the mining difficulty.
Still, the overall conditions are not easy for the mining industry. As soon as the BTCUSD starts trending over the production costs, the miners will be profitable, and the Bitcoin network should have more incentives to ascend.
Fear & Greed Index
At 25 points on the scale, out of 100, the index reveals the “extreme fear” is present among traders. The more extreme the sentiment becomes on the fear side, the better the contrarian setup to counter trade the depressed investors, who give up on their Bitcoin investments. This may, conversely, create a liquidity pool for larger entities to acquire big BTC portions at lower prices. As a result, this may, at one point, bring an explosive break above the said 200-day moving average, which in turn would confirm the reversal into a new bull market, most likely.
For now, the trends are pointing to the downside.
It’s not worth to fight the Fed, either.
Caution is recommended – especially that the first two months of a year are more bearish than bullish, historically.
Hope it helps.
Thank you all for 2022 spent together. If you’re reading this – congratulations. You deserve the highest respect for surviving one of the most challenging years for crypto EVER. Well done!
Let me send the best wishes for 2023. May God bless you and your beautiful families.
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