Daily Report – Bitcoin and Market Update (January 22 2022)
HTF 12H:
With the overall red bloodbath across all the financial markets out there, perhaps except for commodities, crypto took the biggest hit. The total market capitalization of the crypto market has retraced by 50% when compared with November’s values.
BTCUSD is currently trading at 50% drawdown levels when compared with November highs. Just in the last two days we are looking at 20% plunge from already extremely oversold conditions. The worst of it all is that bitcoin is still trading inside this monster range of 2021 between 28800 USD and 69000 USD and because of that it is technically not even a macro down trend.
Having tagged 34000 USD lows, it’s escaped the regular volatility range well below, which marks abnormal downside volatility, and typically a bottom area, at least with the short-term implications. Volatility highs of BPRO Momentum Bands suggest 45-47k USD is supply zone for now.
CTF Trailer Stop at 40499 USD is the most important invalidation levels for the bearish thesis. As long as bitcoin trades below, the bears keep the advantage over bulls. This means that in case of any external factors (like further global financial markets collapse or military conflicts emerge – Russia & Ukraine), there’s still a chance of visiting 28-30k USD lows area.
To put it in a broader context, stock reports seem to confirm the most bearish conditions since March 2020 or even global crisis of 2008.
MTF 4H:
MTF chart is showing similar signs of abnormal downside volatility after failing to hold 41440 CTF Trailer given in the previous reports.
BTCUSD is trading below the Low Momentum Band with a long-legged doji candle which can be associated with a kind of high wave dragonfly doji. This may mark the bottom for the next hours, but I would be cautious with expecting this candle to be the very bottom. If anything it’s showing exhaustion from the bears’ side rather than a buying power from the bulls’ side.
Key supply block is located at 41.7-42.3k USD, which is additionally backed by the volatility zone 42-44k USD, making this eventually a larger supply area 41.7-44k USD where short-term longs are vulnerable.
The bottom pivot level at 35.1k USD is the key support below which bulls would not want to see a 4H or larger time frame close beneath.
On another note, the combination of 33000s CME gap and 3D main pivotal area suggests the potential bottoming zone to be 33-34k USD.
LTF 1H:
The hourly chart shows a local resistance area 35.5-36.2k USD, which if overcome with a strong hourly close above (or best 4H close) unlocks the next supply block upper in the chart 38.6-38.9k USD with final pivotal resistance at 43.1k USD.
Bitcoin is also sitting at a short-term BWAP block support 35.3-35.5k USD, which if lost brings higher chances of tagging low 33000 USD.
The candles do not seem to be confirming that the final bottom or flush is in just yet. The current bottom candle is rather an indecision than a sudden purchasing power kicking in, which makes me think the carnage is not yet over. In the overall risk-off environment and similar carnage on the equity markets (positively correlated with Bitcoin), the condition needed for bitcoin’s buyers’ “safety” is to get back to the risk-on approach with stock buy-backs.
Overall, because this is still part of the monster range of 2021 with ~30000 USD lows and ~69000 USD highs, any of the range trading strategies can be applied:
- Inside Range Trading: buy the range lows, sell the range highs
- Outside Range Trading: buy the upside breakout (retest), sell the downside breakout (retest)
- Do not trade the range at all.
FEAR/GREED INDEX
The public consensus seems to be in historical pivotal area based on the sentiment records. BUT, do not forget this index is NOT a timing indicator like e.g. RSI. It does not tell you when a top or a bottom occurs. Instead it marks the zones of cheap buys and expensive sells.
Because my main focus has been the major picture and bigger time frames in the past months, I still have not given up on my new highs thesis on crypto. It’s in a big struggle with heavy declines all across the board, but unfortunately it still has NOT broken out of the monster range which is the most important one for me for the larger picture. Because of that, the new highs thesis may not be invalidated, because the market is not in a major downwards trend. The fact that the range alone (40k USD size) is 2x larger than the entire bitcoin’s price history to 2017 ATH levels, it is a very wide zone and it is logically harder to pin point perfect top or bottom based on any indicator out there as you need to more or less randomize within a way larger sample of data.
All that said, because the index always shows a good buying or selling opportunity IN ADVANCE, it is usually early as the market can stay in extreme greed or extreme fear conditions for months. Still, this does not change that this index presents contrarian opportunities. It implies, that sooner than later (at times it’s a week, at the other times it is 2-3 months) those who counter trade the sentiment in the extremes tend to be profitable on their positions. I can’t see a reaon why this would be different or that the indicator has stopped working at all this time.
All things concerned, I don’t know when exactly, but based on the technical data, bitcoin should soon be trading back in the upper 40000s region – unless the world collapses and we all die in fire, buying in the low-mid 30000s area seems to be a good directional bet (of course, the main assumption is that the positions are not leveraged or over invested with money that one can not afford to lose).
Hope this report helps you understand current bitcoin context and the broader picture outside 1 minute charts. More details in the exclusive video reports.
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