Daily Report – Bitcoin and Market Update (June 27 2022)
The weekly chart has added yet another bar and close under the 200-week average.
Historically, long-term purchases near and under the 200-week mean have been more profitable than not.
The BPRO remains still on the bearish note, ever since the 2022 beginning. There is an attempt to build a base at the BWAP block zone at 20-21.7k USD.
The spinning top candle seems to be aligned with low volatility, when compared to the capitulation bar 2 weeks ago.
After escaping the sideways pattern that had formed for a 1.5 year period, the correlation coefficient increased sharply to 86% vs S&P 500. Now, it has locally declined to 0.78 ratio, and as such – remains strongly positive. This suggests a strong dependence of bitcoin movements on the large cap movements.
As the history learns, BTCUSD usually puts a final trough in the price when inside the 80-90% drawdown zone, measured from the peak. While this theoretically paints a raw potential bottom closer to the 10-15k USD area, the representativeness bias should not prevail – the past is never a guarantee of future performance. However, the history often rhymes.
The middaily chart maintains that the main resistance at $23141 has not yet been broken.
Instead, after printing several orange-colored (bullish) bars in the chart, a local trend line of a steep upwards bounce off the 17.5k USD lows has been broken. This may suggest that the short-term outlook for the bounce has slowed down, and the local upwards trend is searching for a new, more sustainable angle of the trend line.
The CTF Trailer remains still on the bearish note. For this reason, the bears should be expected to be still in control over the medium-, to long-term picture. Should it change with a break above the $23200 level, the bulls will win back the upper vote.
Until that happens, the supports are more likely to be broken, while the resistances are more likely to be held.
The MTF chart is making a retest at the main short-term support level of $20616.
That is the level defined by the BPRO and recognized as the most relevant, essential for the short-term bulls to maintain the upper hand in the market. If that level is broken with a daily close below, the chances are that the short-term bears continue to escalate the short-term fall.
A measured move following a breakdown to the local range pattern (20.6-21.8k USD) may take BTC to as low 19.2k USD.
However, a more relevant support rests at $17104 as given by the BPRO. At the same time, the BPRO 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
The short-term chart shows a couple of hints, in favour of the short-term range-bound pattern development.
Firstly, there has been an overthrow on top. Bitcoin has printed a failed breakout above the previous swing high at $21708. This typically is a sign of temporary weakness, as BTC is unable to reclaim the higher levels as a new support. Typically, this would add validity and strength to the resistance at 21.7-21.9k USD.
Secondly, the BPRO divergence system implies a 73% divergence score on top, signaling the overbought trend sentiment, where the momentum has slowed down, increasing chances for distribution pattern to unfold.
Finally, the up-trend line pattern has been broken down and rejected subsequently. As you may know from the most recent paper, trend lines often work as dynamic barriers (support or resistance). Traders tend to adjust their stops and bids for their loss aversion and regret bias after getting hurt in the past. With order clustering, longer trend lines often break with more volatility, as the local trend gets exhausted.
As far as the sentiment goes, the extreme fear in the market barely improves. It is yet another session at 12 points on the index scale, which belongs under the category of capitulation stage in the market. If one looks closely enough, they will most likely see a lot of similarity in the shape of the reversal patterns within this cycle, since 2018. This is the third attempt at the capitulation. While the resemblance is apparent, the representativeness bias should not prevail in sound reasoning. As traders, people tend to extrapolate on a small sample of data. Here – just because the past 2 reversal patterns were similar, it does not guarantee that the current pattern will unfold in exactly the same way. Nonetheless, the crowds are always wrong at the extremes. Hence, trading counter the panic selling should prove traders profitable over the time.
Bitcoin: Net Unrealized Profit/Loss (NUPL)
Following the CryptoQuant’s definition breakdown: “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.”
Clearly, the current NUPL ratio at -0.07 is classified as the capitulation based on the ratio benchmarks. Historically speaking, buying into capitulation is more profitable than selling into it. There may still be some pain left in the market ahead. However, the bottoming pattern or period may happen to be an opportunity of a lifetime.
Hope it helps. God bless
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