Daily Report – Bitcoin and Market Update (October 27 2021)
The daily sessions have reverted to the 20-day mean (~60k usd) for the first time since 44k usd upside breakout. While the daily candle is not closed yet and hence its not my main point of interest at this very moment, the Bollinger Bands highlight the volatility range to be set between 53.3k and 66.2k This suggests that 95% of the time, bitcoin’s price action should be trading between those two extreme levels set as the range boundaries. The moment we see a proper breakout with a proper daily close through either band, this will be classified as a volatility breakout. Such abnormal volatility should serve as short-term buying or selling opportunity depending if it happens on the top or on the bottom.
Here, because of the new ATH that bitcoin’s made and the fact we’re consolidating in a sharp uptrend, I’d not necessarily expect 53000s to come unless strong FUD news comes out e.g. from FED punishing crypto taxes or other unpredicted black swan like military conflicts. The insane strength that bitcoin is showing recent weeks combined with monthly chart being pure power from bulls sets the long term trend to continue upwards – imo beyond $100k as the monthly momentum is nowhere near exhausted. The way I read it, local consolidation 58-67k is a bullish one.
The middaily chart is showing local retracement for as much as 13% so far with price action hovering right above local aVWAP support 56390 anchored at the beginning of the last leg up. This tells me that the fair price of bitcoin accounting volume and price action ever since the end of September is around 56k usd. Anything over that level is considered short-term over valued per the nature of cycles. Does that mean the market is about to reverse? Not really. If one reaches to study bitcoin’s price history as well as other volatile assets, they will discover that sometimes upwards trends may remain overbought or overvalued for days, weeks, months or even years (e.g. tech stocks). It rather suggests for when one would make good decision to lock in some profits.
No matter bitcoin goes to 56390 or 53.3k or rolls back to 65k within the next hours or days, it’s still bullish for the next 2-3 months and that’s what matters. Only unpredicted huge orchestrated FUD can change that but even that is unlikely imo. For the safety though, 43.7k and 47190 are the supports defined by long-term aVWAP levels.
MTF picture is showing local range to continue and currently trading at the low extremes within a price action based demand zone. In the recent history, this is the area where bitcoin followed springs off the supports. Risk/reward ratio for the sellers here is rather poor. It’s clear that the market has been heavily over leveraged. The more leveraged the market gets, the more extreme emotions accompany on the sentiment’s side and the more “spectacular” pumps/dumps.
Volume profile analysis points out that the previous area of interest for bears with PoC VWAP levels around 63-63.7k region was confirmed to be strong – additionally backed by the concept of 50% Fibonacci retracement and mid-range boundary. The most recent leg down (while still inside the neutral range) shows that the most volume/liquidations were peaking at 62800s and 60600s while the local low at 58000 was poorly backed by selling volume. It suggests chances for local selling exhaustion.
As for any range, it is possible to see liquidity hunts and fake range breakouts – fakeouts. This range pattern involves actual Head & Shoulders pattern yet it’s worth noting that most of the head and shoulders pattern for bitcoin tend to present fake breakdowns followed by an upside rally as people tend to short prematurely before even the right shoulder forms.
For the range trading remember about:
- Inside range trading (buy range lows or sell range highs)
- Outside range trading (buy the breakout retest or sell the breakdown retest
- Do not trade the range at all and wait for the trend to come up.
Bitcoin: Net Unrealized Profit/Loss
NUPL ratio suggests that the market is deep in the belief mode full of bullish sentiment, which confirms the upwards trend direction as long as it’s outside the extreme zone with NUPL > 0.75.
Locally retraced from 0.658 to 0.622 which suggests that the market has decreased its leverage exposure by around 5%. Not much of course but it definitely cools off the market by flushing the most inexperienced/aggressive traders trading high leverage. As long as bitcoin sits inside the belief zone you’ll hear me repeating over and over again that it’s good to keep locking in profits to put aside after every major pump.
The higher the NUPL goes, the more profits should be taken off the table. The moment that NUPL crosses 0.75, Im personally switching from “chill scale-out mode” to “aggressive scale-out mode” distributing profits to gold, silver, real estate, commodities, commodity stocks, cash and other ventures.
For now, we’re far from historical peaks and highs of 0.8-0.87. This does not look like top for sure to me.
Bitcoin: Mean Hash Rate (168h MA)
As glassnode explains, this indicator stands for the average estimated number of hashes per second produced by the miners in the network. It represents the computational on-chain engagement and network stability. One can notice that the price of bitcoin is more inflated if we account that we pulled off new ATH on price while using only 85% of the hash rate given at the market highs in April-May. It means that the price is boiling while using only limited supply of the onchain power. This suggests to me that the price has a lot of room for upside growth from here after local corrections. There’s no trend divergence – both trends (price vs hash rate) confirm each other directionally showing off stability of the upside growth. Expecting new highs after tertiary retracements (noise). To all new traders in the market – if you’re new and want to go premium 7 days free trial – no charges, nothing, zero, zip, zilch, nada (regardless you stay or not) – feel free to sign up with the link below. God bless!