Daily Report – Bitcoin and Market Update (January 1 2022)
The new year is here! 2021 closed at 46211 USD after having opened at 28990, overall returning 59.40% return for holding through a year. After peaking at 69000 USD level bitcoin retraced for as much as 33% at the yearly close. Relatively not large candle real body suggests 2021 was a more consolidation-oriented period rather than an explosive movement as in 2020 (651.43% return).
2022 has opened at 46200s. Based on the momentum phenomenon, that makes the trends persist in the prior direction, it is possible for 2022 to see the new high levels and optionally the new low levels. In other words, it is expected to be of relatively large volatility, greater than 2021.
I personally expect for this year to see the final reversal peak of the bull market. If historical records are of technical value (which they are), it is likely that we would see bitcoin peaking and launching the bear market within the same year. Because of that, to me, it will be a year of realizing profits and timing the migration of the capital to the outside of crypto, at least in the major part.
With the yearly close of 2021, the 4th quarterly candle of the year closed along confirming a technical fake breakout outside the yearly range.
2021 traded mostly between the boundaries of 27678 USD lows of the year and the highs of 64899 USD with a minor fake break outside the upper bound to 69000 USD. Technical fakeout usually is not the most bullish indication one could derive as the market proved ineffectiveness in maintaining the new levels.
The quarterly candle closed near its opening price showing a significantly long upper shadow and nearly full retracement off its highs. Hence, the entire zone between 46211 USD and 69000 USD has been so far proven to act as supply. Now, to deny or take some credibility away for this zone to be of supply, March needs to show off a strong bullish close at least higher than the previous close. Yet, it would be best for bitcoin and most promising for bulls to see Q1 2022 close in the zone 53000-58800 USD or higher. Otherwise, a few more months would be held inside the very same 2021 range, making it even more “boring”.
The monthly candle closed above the broken monthly support of October’s lows. December showed a thin demand layer between the lows of 42333 USD (or 42000 USD – depends on the exchange) and 45831 USD. It’s definitely not the most spectacular demand zone of highest credibility, but it does show where it’s relatively poor bet to sell anywhere inside this zone.
As behavioral finance suggests, traders continuously update their reference points to make financial decisions upon. The most relevant anchors for January 2022 seem to be the December’s low (42333 USD) and high (59118 USD). With such, it would be considered a bearish month with the close beneath 42333 USD and bullish month with the close through 59118 USD.
Otherwise, a close inside the December’s total range or candle body range (56998-46211 USD) would not be of much reference or technical utility.
A monthly close or break outside December’s range could be indicative of an explosive price movement following.
The middaily session closed as yet another black candlestick under the BaseLine average while in the range floor around 46000 USD.
BPRO flashed a potential bullish pivot indication on 30th of December 2021, yet as long as BTCUSD keeps closing candles beneath the BaseLine, I’d not over-rely on this indication. It is a price positive mark, though.
CTF Trailer at 49842 USD is the main invalidation level for the entire correction off the 69000 USD highs.
Momentum Bands indicate that standard deviation based volatility give the most probable range for early days of January 2022 between 42.8k and 54.5k USD. As the bands have widened the bandwidth after the failed 52k USD breakout, it is now more likely to see bitcoin near 43000 USD momentarily than it was a week ago. Most of the time, though, bitcoin should trade between 44.8k USD and 52.5k USD.
One way or another, the official price action based sideways continues as long as bitcoin moves inside 42-52k USD range and only a successful close outside the range bounds would be considered a reliable trend signal.
MTF chart shows another fakeout at the lows based on the price action alone – a new local low and the close above the broken support.
BPRO suggests a BWAP (VWAP block) support at 46.4k-46.8k USD while bitcoin is trading over the BaseLine. Trading below the said zone is considered short-term bearish and trading above the zone is considered short-term bullish.
CTF Trailer Stop set at 49029 USD is invalidation level for the short-term downwards movement.
As in the previous fakeout case (52k USD highs), the floor fakeout is usually indicative of short-term upwards action to follow.
Level Lines show support at 45426 USD in case of a close beneath the BWAP block. Resistances are set at 49726 USD and 59305 USD. This, combined with CTF Trailer Stop, suggests that 49029-49726 USD is a cluster of resistances – in other words, supply zone and rather poor risk/reward for the day traders planning to long in this area.
I’m not expecting any fireworks inside the 45426-49726 USD zone.
The hourly chart shows off a range bound movement between 52100 USD and 45600 USD with two subsequent range fakeouts. The market seems to be swinging back and forth with no directional consensus and as long as it does, there’s no trend trigger for the short term.
BPRO has already flashed a CTF Trailer supporting a new upwards trend with invalidation stop at 46774 USD.
BPRO Level Lines show supports as follows:
BPRO Level Lines show resistances as follows:
These levels could be anticipated to serve as level-to-level references. In other words, when one level is breached, the next one in the direction of the movement can be expected to act as the next “magnet”
Bitcoin: Net Unrealized Profit/Loss (NUPL)
NUPL ratio at 0.48 for the yearly open of 2022 suggests that the market is as under valued based on onchain as BTC was at high 30000s USD or low 40000s USD. It means that as bitcoin moves higher subsequently, the market maintains the same onchain oversold conditions. It’s an increasing onchain divergence in favor of bulls.
In 2021 NUPL never entered the historical topping regions over 0.75 NUPL ratio. Regardless of the time and when that happens, NUPL does not generate a market top warnings sooner than it enters 0.75-0.85 ratio. Because it is a ratio, it is universal measure for the entire bitcoin’s history. In other words, historical records of NUPL 0.75-0.85 peaking zone remains valid now with exactly the same validity as it had in the previous bull markets.
2022 opened in the sentiment of extreme fear! The index shows 21 points on the scale and is potentially promising for the first weeks of 2022.
As mentioned on my latest webinar, every year in the past 7 years of bitcoin’s history, has been followed by at least a short-term upwards trend, bounce or relief rally. It aligns with the extreme fear thesis.
Historically, extreme fear provides better buying opportunity than it does for selling.
The crowds are usually right in the middle of trends and usually wrong at the extremes.
Any time in the last 365 days bitcoin hit the sentiment of extreme fear around 20 points on the scale, it was soon followed by an upwards price action.
That said, it is not a timing indicator. It does not suggest that the market is to bounce instantly. Instead, it tells when the market is “cheap” or “expensive” based on the sentiment and historical records. For now, bitcoin seems to be cheap indeed.
With this long report, I’d love to wish all best for 2022 for everybody who reads it. Happy trading everybody and in case you want to learn more about my expectations, just watch my latest webinar (linked below). God bless all!