Daily Report – Bitcoin and Market Update (June 20 2022)
The weekly chart printed a major break-through session for BTCUSD, taking it among the deepest historical corrections.
Finding support at the cyclical AVWAP ~ $17800, an intraweek bounce was recorded, following a major decrease, forcing many firms, and funds to go bankrupt, or insolvent. Also, well-known and largest crypto funds suffered from overwhelming losses, forcing liquidations. It remarks financial distress stage of the market cycle.
The main long-term support is also provided by the 200-week average at the 22500 USD area. While it is not set in stone that BTCUSD does not slip below those averages, historically bitcoin rarely stayed at those prices for long-term.
Historical records of bitcoin’s cycles typically show 80-90% drawdowns off the peaks. Now, when BTC is at -75% retracement depth, there might in theory be more flush ahead. This historical evidence gives empirical frequency and probability, which is relatively high and in favor of BTC reversal within the 80-90% drawdown range. However, one should not anticipate to catch the perfect bottom.
The main resistance seems to be within the 26500-28500 USD territory, based on the price action analysis – the polarity change principle.
The correlation coefficient has also increased up to 0.87 or 87%. It suggests strong dependence of bitcoin price movements on the price action of S&P 500.
Furthermore, the Relative Rotation Graphs – RRG – chart analysis shows long tail on the far left, oriented to the downside corner. This confirms relative underperformance by a lot against the benchmark – S&P 500 – both in terms of relative momentum, and relative strength. For this, sector rotation does not support portfolios being overweight crypto.
The middaily chart shows BTCUSD is attempting to build a base in the upper $19000s.
With the downwards acceleration, the CTF Trailer has been downwards-adjusted. As such, the Stop level at $21341 is the main invalidation level for the bears, and a solid threshold to break above for the bulls, in order to re-gain the control over the market. Until that happens, the bears remain to have the upper hand and are in control.
The pre-breakdown support territory of 28000 USD should turn into a resistance now, also on the self-fulfilling prophecy basis. Traders tend to display “magical thinking” and heuristics (rule of thumbs), where the support and the resistance switch the roles interchangeably.
Until a decent follow through 23141 USD occurs, the bears may continue to panic sell into the lows, contributing to further downwards price movements.
The MTF chart shows an attempt of a breakout above the main trend threshold at 21000 USD.
The CTF Trailer has converged downwards with the price, and bitcoin is knocking right on the resistance of the CTF Trailer Stop level. If broken to the upside, bitcoin may get a momentum kick to empower further upwards continuation toward the 25200 USD area. A failure to close above 21000 USD brings higher chances for a deeper retest into the 17000 USD area.
Apart from the support at $17104, the BPRO Level Lines define resistances are projected 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
The short-term price action shows some local consequence in the upwards trajectory, for the first time in a while.
The upwards sloping price movement is recognized as the series of higher highs and higher lows. However, note that the momentum is not the most apparent in there. The vertical distance between the peaks and troughs is not large, which makes the price action rather condensed. This congestion suggests that the upwards trend gets exhausted relatively fast and may lose the steam sooner than later.
Otherwise, if the up-trend line maintains the slope, I would argue that the next resistance may be the very HTF Stop (12H CTF Trailer Stop) at $23141. If this HTF level is reclaimed, short-term price action may also promote to develop on that.
A trend line breakdown may add to short-term range pattern and switch the upwards trajectory to neutral sideways with more chop to follow.
A visual comparison of the most recent capitulation setup resembles the other instances of this cycle: the bear market depression of 2018, as well as the covid crash in March 2020.
While it is not set in stone for BTCUSD to revert upwards immediately after the sentiment pulls the historical lows, the mean-reverters and contrarians may consider current prices attractive on the contrary opinion basis. It is, knowing that the underinformed crowds are always wrong at the market extremes, and reversals.
Now, at 9 points on the sentiment scale out of 100, BTC could be considered to be inside the “cheap territory”. It is NOT, however, a timing indicator. So, it should not be associated with a complete trading system (entries, exits, stops, profit targets, triggers).
Regardless, obvjectively speaking bitcoin seems to be providing historical opportunities around these days and one should note for the sentiment readings to create a deeper understanding about the market context.
Bitcoin: Net Unrealized Profit/Loss (NUPL)
Quoting the CryptoQuant’s definition, “Net Unrealized Profit and Loss (NUPL) is the difference between market cap and realized cap divided by market cap. Assuming that the latest coin movement is the result of a purchase, NUPL indicates the total amount of profit/loss in all the coins represented as a ratio. It could be interpreted as the ratio of investors who are in profit. Values over ‘0’ indicate investors are in profit and an increasing trend in value means more investors are beginning to be in profit. This phase indicates the increasing reason to take profit which leads to an increase in sell pressure.”
The NUPL ratio is currently at the territory defined by the -0.19 to -0.1 boundaries. It is an unprecedented depth for this metric, which typically aligns with attractive return-to-risk ratios for the long-term investors, scaling into larger positions. More often than not, those buyers are the bottom-buyers in the hindsight.
Based on the records above, I choose to personally employ a partial long-term purchase – addition to my long-term stack in my already well-diversified portfolio of different assets.
More in-depth explanation I’ve added in premium video reports.
Hope it helps. God bless
P.S. Right or wrong, history often rhymes: https://twitter.com/crypto_birb/status/1538889025569931265?s=20