Daily Report – Bitcoin and Market Update (December 6 2021)

By Cryptobirb

HTF 1W:

Weekly candle closed over 50-week average after price shock showing off rapid decline of 15-20% on an hourly session. Total drawdown measured from the peak places it near -40%, which historically had happened before several times. During the last bull market of 2015-2017 the traders saw multiple 30-40% retracements happening successively on the way which did not stop bitcoin from growing exponentially upwards. I expect nothing different this time.

As any other price shock, bitcoin will likely need some short sideways period to recover people’s PTSD and denial. According to the liquidation measures, 2.5B USD worth of liquidations came up on the shock day. 

Currently trading over 50000 USD bitcoin has its local resistance area in 53-55k USD region, which due to enhanced volatility is fair to be expected a pullback in there. Weekly close over 49k USD showed large demand beneath this level, seen as a long lower candle tail tagging 42k support to rally back at 49k on the same hour.

Just like any other price shock in bitcoin’s history, for now it doesn’t seem to have changed anything about bitcoin’s long-term direction (MA50 orientation). In my honest opinion, bull market resumes with no invalidation and that thesis should be defended as long as both MA20 and MA50 ascend in tandem – which is the case for now. Short-term noise and fluctuations do NOT disturb longer term trajectory. Worst case is that it takes a bit longer to unfold.

HTF 1D:

CME futures chart on the daily timeframe with 200-day average applied shows mean reversion completed. Interestingly, bitcoin did not trade for a moment below 47000s as for CMT futures chart. Instead it gapped down at the futures open creating an open window.

The upper bound of the gap/window for futures is 51500s which in my opinion should get filled sooner than later due to abnormal volatility after the shock.

MA200 ascends and as long as it does, long-term trajectory is upwards. Any oscillations around the mean are considered noise and should not be a worry for position traders as well as buy-and-hold investors.

In case we see extended sideways period lasting through the entire December till early-mid Q1 2022, we would observe MA200 to switch trajectory to plateau. All together this may or may not mean “micro 2019 pattern” to “repeat”

Price shocks disturb short-term directions and turn them into chaotic noise with no concrete direction so trend switches to sideways and usually takes 1-3 weeks to recover from the chaos and become more “rational” again.

In other words, this unpredicted price shock did not cancel all my plans, expectations of the final wave of the bull market, but rather extended them in time.

HTF 12H:

The middaily chart shows off three key pieces of information to me locally.

Firstly, aVWAP anchored at the top shows off the fair, average price of bitcoin based on market action and Volume is around 57000 USD and due to mean reversion, sooner or later I’d expect bitcoin to re-visit this region. This a medium-term average hence the upside pullback is expected also to be of medium-term length that is 3 weeks – 3 months. 

Secondly, long-term aVWAP shows off major significance level at 50000 USD and depending on the relative price action position, this level should work as a magnet resistance or support. 

To match the first note, pre-breaker level 56050 USD aligns quite well with 57000 USD level which suggests that this is a resistance cluster for the short-term price action. Short-term is defined as anything below 3 weeks so if BTCUSD is to see an upside pullback into this region, I’d expect it to happen before the year ends.

MTF 4H:

Short-term picture is the most oriented for the PTSD range of chaotic, nondirectional price action full of noise, traps and fake breakouts.

Volume profile analysis confirms that 53-54k USD area is defined by volume and price as short-term resistance zone hence opening any buys inside this region makes it potentially weak payoff.

Supports defined by volume are given at 47300 USD and 48.3-49k USD region. Similarly, shorting or selling into this area is rather a weak risk/reward play and in trading it’s all about probability.

PTSD range suggests that for next 2-3 weeks it is likely bitcoin will move sideways between 42000 USD (perhaps sweep the lows beneath?) and 51-52k USD area with mid-range at 47000s. Anything below attracts lower levels, anything above attracts low 50000s USD.

I’d not expect anything else for now than chaotic movements with no directions and a lot of choppy sideways traps, which over the time should fade away. Until that happens, it’s safer to assume that the said price shock moved over assumed bullishness from December to the later dates, potentially early-mid Q1.MTF picture in the line chart suggests and confirms that 56-57k USD zone is crucial for bulls to reclaim in order to bring back bullish momentum on the short-to-medium term basis.

There’s also significant S/R level marked in the chart for the short-term movements – 53726, which currently should act as a resistance.

In other words, there seems to be a congestion of different resistances between 53000 USD and 57000 USD. Hence, this is not a good idea to long into this area before an upside breakout retest confirmation. Risk/reward ratio would make it not worth the game there.

Per the bottom indicator ATR, which shows an averaged volatility of 14 past periods, the volatility (and risk) for short-term traders has increased by 100%. It’s double as volatile and as risky to trade as it was before the price shock came in.

It is then suggested not to over expose or over trade this area.

LTF 1H:

Short-term picture is the most oriented for the PTSD range of chaotic, nondirectional price action full of noise, traps and fake breakouts.

Volume profile analysis confirms that 53-54k USD area is defined by volume and price as short-term resistance zone hence opening any buys inside this region makes it potentially weak payoff.

Supports defined by volume are given at 47300 USD and 48.3-49k USD region. Similarly, shorting or selling into this area is rather a weak risk/reward play and in trading it’s all about probability.

PTSD range suggests that for next 2-3 weeks it is likely bitcoin will move sideways between 42000 USD (perhaps sweep the lows beneath?) and 51-52k USD area with mid-range at 47000s. Anything below attracts lower levels, anything above attracts low 50000s USD.

I’d not expect anything else for now than chaotic movements with no directions and a lot of choppy sideways traps, which over the time should fade away. Until that happens, it’s safer to assume that the said price shock moved over assumed bullishness from December to the later dates, potentially early-mid Q1.

Bitcoin: Net Unrealized Profit/Loss (NUPL)

NUPL retraced back to 0.5 level after wiping out 2.5B worth of leveraged positions. It hence cleared the market and decreased the overall over extension from the market. Long-term wise, such shakeouts are rather healthy as long as they happen throughout the bull market, which is still the case against any contrary opinion.

No ultimate NUPL peak signal has occurred this cycle yet. For this reason claiming it’s a bear market to me is a bit far-fetched and not backed by fundamental, onchain, sentiment or technical data. And no, short-term or medium-term corrections do not state bear market is in the play.

Whenever NUPL crosses over 0.75-0.8 this is a heavy exit signal for me. This plan has not changed on my end. As said before, the plans of mine haven’t been canceled or destroyed. Evenutally, why would I know perfectly where and when exactly bitcoin will be trading in 5 years 5 days 3 hours 17 minutes and 55 seconds from now? Same way, I can’t tell if the exit signal comes in December, January or e.g. May 2022. But because of that, I will specifically monitor NUPL printing the signal first. The threshold hasnt been marked yet so the thesis I’d been playing since June, after almost half a year is still valid IN MY OPINION. 

If I’m right or wrong time will tell.

FEAR/GREED INDEX

The sentiment has changed from greed 71 of November to extreme fear 16 in December. It’s quite a 180 degree turn on the sentiment side which shows how quickly people can drop off their beliefs from a month ago and take completely contrary side denying themselves.

This index is NOT a timing indicator so it’s not going to tell you when you should buy or sell. Instead, based on historical records it suggests that anytime that bitcoin has visited extreme fear territory (last time this low in June-July 29-30k levels) it’s always been way better buying opportunity than it was for selling. There’s no reason for me to suddenly stop believing this metric as human behavior doesn’t change. 

The market is always right in the middle of trend and always wrong at the extreme. The more extreme the sentiment gets, the wrong-er the herding behavior gets. 

It all hence suggests that, no matter when – next week or next month – loading up dips beneath 49k USD should become profitable payoff soon after. 

To repeat my final opinion, the bull market is NOT canceled and charts do not suggest that to me in either way. Short term unpredicted price shocks tend to prolong/extend uncertainty period adding a few weeks here and there usually but from the longer-term perspective, this usually doesnt matter or does not disturb the long-term trajectory. That’s what I believe in, that’s what I’m trading and nobody will make me think or say otherwise just because there are many other opinions. It’s fine to disagree with me. Eventually, it’s about making money, not being right. 

P.S. Huge launch is coming next week! Stay tuned and God bless!

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