Bitcoin enters proving grounds
Updated
Yesterday, we noted that a breakout above the Sloping resistance and 29 380$ would be bullish for Bitcoin in the short term. What led us to this quick assessment was the similarity of the pattern found on the 1-minute chart, which seemed very familiar to us. It was, once again, a quick spike in the price within a short interval (very similar to the ones we showed previously on 1-minute graphs). Shortly after that, the price broke to the upside, bringing Bitcoin to a critical zone above 30 000$.
Interestingly, this move precedes the start of earnings season in the banking sector, which helped to prop up the price recently with the crisis among regional banks. While Bitcoin’s reaction to the crisis might be considered the first potential sign of maturing and gaining more functions (than just being a speculative vehicle), let’s not forget that it still faces many obstacles that may derail it from the intended path.
These obstacles include a lack of the regulator’s clarity on its future plans, especially as central banks attempt to develop their own digital currency (CBDC). For example, there might be a potential cryptocurrency crackdown in the form of restricting money transfers to/from cryptocurrency institutions or any other forms that will make it very inefficient for a consumer to use them. Furthermore, the U.S. government still plans to unload its stash of more than 41 000 Bitcoins seized in connection to the Silk Road bust. This amount might not seem as much compared to the daily volume. Although we think this action's timing is also crucial and something that many people seem to underestimate; illiquid markets require less “firepower” to move the price (it applies to both directions).
In addition to that, high-interest rates finally start to manifest their impact on the consumer, for whom it is harder to service debt and pay for goods with elevated inflation. As a result, this might put many people in a position where they will have to decide whether to pay bills and get food or hold on to the cryptocurrency stash (rising unemployment will also contribute to this).
With these issues and many more, we think it is still premature to call the winning shots. Because of that, we will now focus on the area between the psychological level of 30 000$ and 32 951$ (which acted as support in early May 2022). To abandon our thesis about the bottom not being in, we would like to see Bitcoin consolidate in this area like it did around 28 000$ (just over the past two weeks). Furthermore, we would like to see a continuous build-up in volume accompanying higher prices. Then, we would also want to see a breakout above the zone, which would greatly diminish the odds of our thesis about Bitcoin retesting its 2022 lows. To support our bearish thesis, we would like to see Bitcoin struggling to hold above 30 000$ and a lack of volume in the market.
Illustration 1.01
Illustration 1.01 displays the 1-minute chart of BTCUSD. The yellow arrow indicates the first anomaly. We previously said that similar moves often kept accompanying the price to new highs, especially during the weekend or shortly after the futures market close (in generally illiquid markets).
Illustration 1.02
Illustration 1.02 shows the 1-minute chart of BTCUSD. The second anomaly occurred right after the futures market opened, where Bitcoin jumped by 500$ within the first three minutes of trading.
Technical analysis
Daily time frame = Bullish
Weekly time frame = Bullish
Illustration 1.03
The picture above shows the daily chart of BTCUSD. The yellow rectangle shows the critical zone between 30 000$ and 32 951$.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Interestingly, this move precedes the start of earnings season in the banking sector, which helped to prop up the price recently with the crisis among regional banks. While Bitcoin’s reaction to the crisis might be considered the first potential sign of maturing and gaining more functions (than just being a speculative vehicle), let’s not forget that it still faces many obstacles that may derail it from the intended path.
These obstacles include a lack of the regulator’s clarity on its future plans, especially as central banks attempt to develop their own digital currency (CBDC). For example, there might be a potential cryptocurrency crackdown in the form of restricting money transfers to/from cryptocurrency institutions or any other forms that will make it very inefficient for a consumer to use them. Furthermore, the U.S. government still plans to unload its stash of more than 41 000 Bitcoins seized in connection to the Silk Road bust. This amount might not seem as much compared to the daily volume. Although we think this action's timing is also crucial and something that many people seem to underestimate; illiquid markets require less “firepower” to move the price (it applies to both directions).
In addition to that, high-interest rates finally start to manifest their impact on the consumer, for whom it is harder to service debt and pay for goods with elevated inflation. As a result, this might put many people in a position where they will have to decide whether to pay bills and get food or hold on to the cryptocurrency stash (rising unemployment will also contribute to this).
With these issues and many more, we think it is still premature to call the winning shots. Because of that, we will now focus on the area between the psychological level of 30 000$ and 32 951$ (which acted as support in early May 2022). To abandon our thesis about the bottom not being in, we would like to see Bitcoin consolidate in this area like it did around 28 000$ (just over the past two weeks). Furthermore, we would like to see a continuous build-up in volume accompanying higher prices. Then, we would also want to see a breakout above the zone, which would greatly diminish the odds of our thesis about Bitcoin retesting its 2022 lows. To support our bearish thesis, we would like to see Bitcoin struggling to hold above 30 000$ and a lack of volume in the market.
Illustration 1.01
Illustration 1.01 displays the 1-minute chart of BTCUSD. The yellow arrow indicates the first anomaly. We previously said that similar moves often kept accompanying the price to new highs, especially during the weekend or shortly after the futures market close (in generally illiquid markets).
Illustration 1.02
Illustration 1.02 shows the 1-minute chart of BTCUSD. The second anomaly occurred right after the futures market opened, where Bitcoin jumped by 500$ within the first three minutes of trading.
Technical analysis
Daily time frame = Bullish
Weekly time frame = Bullish
Illustration 1.03
The picture above shows the daily chart of BTCUSD. The yellow rectangle shows the critical zone between 30 000$ and 32 951$.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Trade active
We will pay close attention to Bitcoin’s behavior on Friday when major banks (including JPM, Citigroup, and Wells Fargo) are set to release their earnings for the first quarter of 2023.Trade active
Trade active
Breakout became invalidated.
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