Daily Report – Bitcoin and Market Update (January 24 2022)
Weekly chart has been updated with an ugly breach beneath the prior week’s support level of 39.6k USD, which now technically has become a resistance. The chart displays 20-week average laid over BTCUSD candlesticks along with the bottom indicator representing the price’s distance to MA20 (% deviation vs MA20). Let’s give a deeper dive into the review.
Firstly, the weekly chart, as the major time frame that establishes the main narrative and trend definition, still shows incoherent sideways movement between the range boundaries 30000 USD and 70000 USD, or precisely – 28800 USD and 69000 USD. Based on the price action bitcoin has marked a High 65k USD in April 2021, then a Low at 28.8k USD in June 2021, then a Higher (!) High at 69000 USD in early November 2021, and currently it is processing a Low – yet to be decided lower or higher. This brief overview suggests it definitely is NOT a downwards trend – a bear market needs to be a downwards trend, naturally – but a form of a sideways. Any downwards trend is defined as a sequence of lower highs and lower lows. Here, we are looking at a High, Low, Higher High, and Higher/Lower Low (?). It does NOT match a definition of a bear market simply because the major trend is not bearish by definition. For this reason alone, one should not claim the prior bull market thesis of BTC reaching past $100k levels to be invalidated.
MA20 moves in sideways also with two bumps occurring one after another with a heavy deviation of price against the average. Current price of MA20 is 51000 USD and based on the mean reversion sooner or later bitcoin should revert back to this mean towards 50000 USD mark. Will that happen prior to tagging 30000 USD range lows or after? Nobody knows the real answer, sadly. What I can see in the chart, though, suggests that the recent bitcoin’s moves have printed a buying opportunity seen only two times ever since 2018 bear market bottom. It is technically as oversold as it was during the covid crash and the bear market depression only. Does this mean BTCUSD must reverse immediately from here? Not at all. If the military conflict continues to emerge between Russia and Ukraine with missiles shot at UAE earlier today, this still provides a risk-off environment where the only safe haven asset is gold (commodities).
It is, hence, possible to see bitcoin continue retracing to as much as ~60% depth of the correction towards 28.8-30k USD range lows. A strong monthly and weekly close beneath the floor would be a substantial warning even for the long-term investors and funds, which rarely ever occurs.
Daily chart has recently been resting at the Low Momentum Band support area (note that a support or resistance is usually an area, rather than a single price level). It implies that the average volatility downside target has been already exhausted. Hence, on average, bitcoin should be looking to form at least a local bottom around these levels.
BWAP block shows volume-based average zone of demand (if the price trades beneath) or supply (if the price trades above). In this context, only a successful close through 38000-38466 USD zone would validate a short-term reversal targeting 44758 USD as the next Level Line to be tagged. Until that happens, BTCUSD remains under the bearish impact. It means that one can not cross a potential flash crash to 29807 USD Level Line out of the list just yet. Bitcoin needs more confirmation to the upside.
In the positive case (a daily close above 38466 USD, there are chances for bitcoin to reach the opposite Momentum Band in the 47000-50000 USD region.
Eventually, bitcoin rarely ever has presented investors with the generosity of -50% sale.
The middaily chart shows off a potential (unconfirmed) bottoming process within the 34000-35000 region, backed by BWAP demand block.
CTF Trailer Stop at 40234 USD marks the invalidation level of the bearish narrative lasting ever since the mid of November 2021. A strong 12H or 1D (or even better – 1W) close above this level should give a confirmation for the end of correction and a new upwards trend beginning.
MTF chart shows the first signs of buying pressure appearing back in the market for the first time since falling off of 43000s USD. It is a good sign, yet to confirm a short-term reversal bitcoin would need close at least two 4H candles through 36500 USD region.
Aside from the current supply being penetrated at this very moment at 35000-36000 USD zone, the main supply zone is defined at 41.7-43k USD zone, with the main pivotal level at 43000 USD. A strong break above this level could indicate a larger and more long-lasting reversal.
Currently BTCUSD is trading above BWAP demand block 34.2-34.6k USD, which is a better sign than not.
Price action wise, It might be significant technically to note that bitcoin has bounced off of 33000 USD round number level twice successfully. It defines a strong short-term support level.
The hourly chart is showing an attempt to breach a key short-term supply zone 35.6-36k USD, backed by the Level Line at 35943 USD. A strong close above 36500 USD may lead to a retest of 38000-39000 USD region, which if reclaimed successfully can lead to unlocking 40864 USD and 43147 USD levels for the tests.
Notice, there is a wide gap of Levels between 35943 USD and 40864 USD. This may be interpreted that a strong reclaim of the lower Level Line may be traded targeting 40864 USD. The Level Lines are constructed to give potential level-to-level trades. It shows the importance of 35943 USD level for the short-term picture of bitcoin.
A failure to close above this price level increases the chances of the lower Level Line at 33493 USD to be retested.
Bitcoin: Number of Active Addresses (168h Moving Average)
As glassnode explaines, this on-chain metric stands for “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.”
While it bears no signs of any generational bottom per se yet, there is a local setup to be mentioned. While arguing to what extent on-chain data has predictive powers is one thing, it is worth noticing the ongoing “divergence” between the price of bitcoin which has been in the decline, and the recent bump on the on-chain side represented by the mean of active addresses.
There are early impressions that the market has freshly started heating up a little bit in the positive direction while the price action has been tumbling. It may be a positive symptom.
The sentiment has rarely ever been worse in the most recent bitcoin’s history.
Only 4 times since the start of this bull market bitcoin reached such extreme levels of fear in the market.
The index shows a hand at 13 points on the scale after flashing 11 points yesterday.
Again, it is NOT a timing indicator, but rather suggests when bitcoin is considered cheap or expensive. For the past days bitcoin has been suggested as a historical buying opportunity based on this indicator. It does not aim at predicting bottoms or tops. Usually, though, after flashing so oversold market conditions, bitcoin followed up with consequent bounce off of the index historically low readings.
Apparently, from the longer-term perspective (assuming there is no fundamental invalidation for the bull market – wars, catastrophes, etc.), it may be irrelevant whether one had purchased bitcoin in the low 30000s or the low 40000s, as if the market is as oversold as it only was during the bear market bottom and the covid crash, then proportionally buying 30000s-40000s USD area may be proven to be of similar results to buying 3000s-4000s USD area.
The majority is usually right in the middle of trends and usually wrong about the extremes. At times one needs to wait longer than preferred for a bitcoin bottom to form, but the history suggests every time bitcoin was this oversold, it was followed by a proper bounce and profitability soon after. That is what I’m still standing by while my focus remains a longer time frame.
More details in the exclusive video report.