Daily Report – Bitcoin and Market Update (June 13 2022)
The weekly closed below the previous key threshold, support at 28800 USD overnight, after the Monday open.
In a quick cascade of sells throughout the night, when the US markets are closed, BTC joined the selling wagon along with stocks, which have heavily plummeted after the stock market open. An overall macro-finance environment is rather confirmatory more for the neutral-bearish solution, opposed to bullish. This does not provide healthy background context for crypto.
After tagging 22500 USD, bitcoin has tested the long-term ultimate support region, defined by the 200-week average ($22381). Historically, BTCUSD had not stayed for below this key threshold and typically brought sharp reversals soon after the retest. While the past is never a guarantee of future performance, it is essential to account for this 200-week benchmark to decide bitcoin’s “cheap” price given by the market itself.
Now, that bitcoin has reached -67% retracement off the peak, the correlation coefficient has rallied back up sharply from 0.47 to 0.71 in recent days. The correlation is vital to understand where bitcoin is relative to traditional finance.
Also, Relative Rotation Graphs are showing relative underperformance of BTC (and crypto) against large cap stocks of the S&P 500 index. This underperformance hints on crypto-underweight portfolio as the preferred version. It’s promoted a lighter rather than heavier weight version of diversified portfolios for cryptos. The yields and dollar prevails, for now.
The daily chart has violated the 2021-2022 support area , taking an elevator down in a single strike, accelerated by fundamental fears about the solvency of main crypto corporate giants, like Celsius Network.
The polarity change principle suggests that the broken support becomes a resistance, so 28500-29000 USD region should be considered such.
This almost -15% daily drawdown is one of the most violent moves seen across the crypto markets recently, beating the LUNA crash. Increased volatility typically brings more fundamental changes in the markets as the biggest amount of volatility, volume (transactions) are being processed. This means that the biggest amount of impatient sells to patient buys takes place, amid the panic selling.
The historical benchmark price for long-term bitcoin outlook has been the 200-week moving average, which is now trading in proximity, at $22379. While it is not set in stone that bitcoin may not break or penetrate this support, historically the response has rather been upwards-oriented.
However, again, trading crypto is more about considering crypto trades as part of diversified portfolio rather than being all in crypto and trading one’s entire futures account on 100x leverage. One always needs to account that it’s purely not probable to pinpoint perfect top or a bottom – it’s a lottery and you never know it’s a top or a bottom, other than observing it with the benefit of the hindsight. Still, it’s easy to get fooled by one’s hindsight bias where everything is obvious, accurate, easy in the hindsight. The reality is, that it is never certain while at the very time of making the decisions.
Besides, the daily AVWAP rests as volume-backed resistance at $41202, which shows an averaged and volume-based fair price of bitcoin, accounting for the history since November 2021 peak.
Bitcoin prices are trading well below that level.
The middaily chart has continued the sell-off after a failed breakout trigger from the BPRO.
After receiving the most recent “Bear” note warning from the BPRO trend-following system I am using, I cut high-six-figure bitcoin spot buy position for 55000 USD loss, which eventually has saved my position another 25% drawdown. This is the very nature of trend-following trading. You consent to getting stopped more often in sideways, and avoid large losses or cash in large profits. That’s the trade-off and at times a run of 5-7 losses in a row out of 10 may occur. Yet, this is still normal as the profits or un-lost capital coming from a trend compensates for all the small losses on the way.
Why am I telling you that? Well, I see what is happening in the market right now and I imagine the panic and uncertainty are peaking amongst many people, inside and mostly – outside our community. There will be many attempts to leverage in and catch the falling knives, attempting to pinpoint the bottom reversal. I am here to warn you. Most likely, before the time you prove your entry right, you would risk liquidating yourself and leading straight into ruin as you are moving counter the trend. In the panic times, it is the money that moves the market. It’s like swimming under the river stream. You can do it for a minute, or two, but you will soon exhaust your moves and leave out of the options. This works the same in the trading world. Some people do not have this comfort to read quality market insights from somebody who had been there and done all that. By providing you with such reports, I am trying to save as many people as possible from the risk of ruin. If one has a small trading account and would keep longing every dip on the bitcoin futures, you would soon find yourself in complete ruin, which basically leaves zeros on your balance.
The percentages law, which stands for (1/(1-%loss)) – 1, gives you the formula for the amount of capital ROI required to overcome a % loss. Imagine a 50% loss: it would take you 100% ROI to make it back. In case of 75% loss on your account, you will need 300% gain to recover the loss. So, to break even on 99% loss, you would need 9900%. Each loss gets you closer to ruin.
All that to say so that you do not attempt to catch a perfect bottom. Until you reach it, you would likely have been already broke.
I am personally waiting for a break above the CTF Trailer Stop $26028, before I make any new short-term BTCUSD purchase.
It is worth observing the BPRO CTF Trailer to get more likelihood of correct trades.
The MTF chart displays a violent outbreak on the volatility of medium-term bitcoin moves.
The BPRO Momentum Bands have been breached to the downside resulting in an heavily oversold (over-extended) strike, way below the Low Band indicator. This marks downwards and abnormal volatility, which is not typical or sustainable. This means it is usually more likely to be a candidate for a peak or a bottom, as the volatility always peaks at the reversals.
The volatility breakdown is a clear mark for the market direction and sets the new anchor at 22500 USD level as a support. While it is not a guarantee to be held ever, one can compare it with the 26200 USD Baseline average to recognize the local range thresholds, most likely.
However, it is not suggested to trade counter the trend during the capitulation spikes. The market does not seem yet to be bottomed out. Especially, that there is a FOMC meeting in June 14-15th this week, which is quite a fundamental event for the week which will confirm the next steps for this rate hiking cycle. This also brings chances for being a candidate for a major twist in the markets, if the readings are more bullish than expected.
Lots of volatility ahead in the short-term. Volatility is risk. If one is more risk averse, I would suggest holding back from trading through the reversal days. That’s where the maximum risk is.
The short-term chart reveals a few resistances projected by the BPRO Level Lines indicators, among other essential tips from the market itself.
Locally, a downwards acceleration promotes rather short-term bearishness than bullishness. The BWAP resistance is adjusted to 23.7-24k USD area. If it is broken to the upside, the chances for a stronger move upwards increase. Similarly, in case BTCUSD resists to break through the 24000 USD resistance, the chances for downwards continuation are getting bigger, as the panic selling emerges.
The main supports are displayed by the long-term charts at the 200-week average, as well as the 2017 ATH peak at 20000 USD. If I were to shoot my blind guess, I would say the bottom is there. However, please understand that this is a guess. Nobody knows what the future holds. Nobody knows the next moves from the FED, Putin’s Russia war in Ukraine, or politicians. Those rule the markets, and not me. All we get is a more mathematized guess, which is nowhere near certain. Still, it may happen to be valuable insight in the near-term, so it’s good to account for it.
Besides, the Level Lines define resistances at following anchors:
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
As the chart suggests, the fear for yesterday reached 11 points on the scale, which again is on the low-end of historical readings.
While it does not aim to time the perfect top and bottom, which by the way is impossible, it can still provide a valuable context whether selling or buying may soon turn out to be more profitable.
At times, the fear environment may stay in the panic mode for days, weeks, or months. However, this does not mean bitcoin has ever lost its fundamental value. The chart implies bitcoin is currently underpriced, accounting for the historical readings.
It may be better to buy in cheaper than at more expensive outlooks. I will provide my personal trading update over my long-term holdings in my private trading channel, available for the exclusive members only. If also want to access premium video report, you can get it with 10% off with the link below.