Daily Report – Bitcoin and Market Update (May 11 2022)

HTF 12H:

The middaily chart continues to trade within a contracting consolidation sequence, bounded by the lows of 29700 USD support, and the 32600 USD resistance.

Amid the stock market fall and indecision, BTCUSD has claimed a lot of selling pressure through the route of strong correlation to equities. At the moment, bitcoin is considered one of the risk-on assets, similar to the stocks, and it doesn’t help BTC gain on price, when the stocks are falling. The fundamental correlation acts against the bitcoin bulls.

Technically speaking, the chart has continued to decline into the long-term chart pattern (28800-69000 USD) lows, so far confirming an intraweek demand in this region. The bitcoin bulls need to win the battle and defend the support level, a line in the sand. If the last bullish bastion breaks, it is likely that a cascade of protective stop liquidations would trigger, taking the price lower – even into the mid 20000 USD regions. However, such a breakdown would need a technical confirmation with an ugly and definite close of a week below the 28800 USD level. Otherwise, the chances are the late shorts will get trapped.

The CTF Trailer has marked the Stop, invalidation level, at $35652. If this level is reclaimed by the bulls with a daily or a weekly close through to the upside, the bulls would re-gain the control over the market. Otherwise, the selloff may continue – especially, if encouraged by an overall global economy decay.

MTF 4H:

The MTF chart tumbles at the lower end of the volatility-projected region defined for BTC by the BPRO Bads.

Per the historical volatility levels, bitcoin is now projected to trade “healthily” within the 29600-35000 USD zone. This area is defined by the Momentum Bands, derived of the volatility indicators, i.a. standard deviation, which is a measure of risk in the financial world. A clean break outside the expected volatility area may confirm an upcoming acceleration to the upside or to the downside, depending on the direction of the breakout.

Because of the momentum principle, trends have the tendency to persist. It implies that the price trajectory, once moved in specific direction, is likely to continue in this direction. For this reason, I would suggest caution while planning on catching the falling knives in such an unstable environment.

It is after accounting for the supply chain crisis, galloping inflation, rate hiking cycle, Russia-Ukraine war, LUNA and UST tokens collapse. In my view, the marked is too much unstable, to allow any confidence or certainty in bets that just because a coin has decreased a lot, it needs to recover fast. Refer to the momentum principle.

A clean break below the 29600 USD support, may trigger further selling off period into the lower support at 28800 USD, or lower – if encouraged by unfavorable fundamental collapses, like today’s with Terra ecosystem.

LTF 1H:

The hourly chart displays a narrow trading range for intraday price action of bitcoin.

As the Momentum Bands have tightened or converged, an expected volatility has high likelihood to provide traders with a more spectacular breakout anytime soon. A volatility impulse would follow a break outside the projected “normal volatility” area 30000-31800 USD. The direction of the breakout would likely confirm a more decisive trend/trajectory to resurface out of the local stagnancy.

The HTF Trailer 12H is, in my eyes, the most relevant resistance to break for BTCUSD, in order to re-gain the control for the bulls. Otherwise, the market remains under the bearish suppression and the momentum principle encourages downwards continuation.

BPRO Level Lines show resistances at:

40468
38760
37669
35499
33781

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 can be expected to act as the next “magnet”

FEAR/GREED INDEX:

The fear saga continues, as the price takes a punt down amid the Terra system collapse. Regardless of the reasons behind the bitcoin selloff, the risk factor does always need to be accounted for while taking any new positions. The current extreme fear environment does not support any dose of optimism among the speculators at this time, clearly.

Per the graph, rarely ever in bitcoin’s history, has the sentiment been any worse than at the current moment. While soaking in an extreme pessimism at 10-11 points on the sentiment scale, this has a potential (although, uncertain) to become a far end of the capitulation and seemingly 6 months of constant declines in the bitcoin market.

As the volatility factors intensify, so does the risk of being on the wrong side of the trend, facing the chances of losses. However, the territory bitcoin has found itself into right now, has historically brought reversals. This index does not assure the prices can not go any lower. Nonetheless, historically, that sentiment depths is when bitcoin had generated the best buying opportunities.

An overall revulstion of the crypto investors seems to be apparent right now, which often marks more favorable buying opportunities than it came for the sellers. Of course, this has been the theme seen in the charts over the course of the past weeks and months. As explained dozens of times in the past, that was to be expected. Mainly, because the fear/greed index is NOT a timing indicator, like RSI, Stochastic, MACD, etc. Instead, it only informs on the contrarian basis, that bitcoin may be viewed as “cheap” right now. The more extreme panic resurfaces, the “cheaper” the bitcoin prices.

I would highly reconsider opening any of new positions at the moment, as the downwards trend has not cooled off in a confirmatory manner just yet, and the upwards trend has not broken out just yet, as bitcoin remains to reside inside the large 2021-2022 chart pattern, bounded by the 28800 USD lows and the 69000 USD highs.