BTC - Bear Cycle? Or Possible Bullish Recovery?
Bottom Line: Technical indicators are mostly trending from bear towards neutral, and if that continues could flip bullish in the coming week(s); but the market is still fragile, retail investors are fearful, and whales/institutions/media can still manipulate or fud the market into another dump so set tight stoplosses. Unless there is a sudden catalyst for an earlier bullish breakout, we will assume the market is following a U shape pattern, with the earliest -possibility- of a bullish recovery between 5 and 13 June when price action potentially converges on critical moving averages that it needs to retake. Failure to close above those levels could result in deeper corrections.
Background: Starting on 10 May, Bitcoin fell over 50% from a final rejection at ~60k to the deepest part of the correction on 19 May (~28.9k). From there Bitcoin quickly bounced back to over 40k before posting additional corrections and extreme volatility, ranging between 40k to 31k in the days that followed.
This triggered a massive dump of the altcoin market, some coins lost up to 70% of their value before the market began to stabilize on 24 May. The correction also liquidated billions of dollars in overleveraged positions as fear grew to levels not seen since the COVID black swan crash. While terrifying for new traders, this isn't unprecedented in crypto markets. This correction leaves the possibility of resuming the bull market at risk, and all eyes are on Bitcoin going into June.
What is Next? I'm watching the moving averages (20/21w and 200d); I'm watching the ADX and DI (Average Directional Index) and the Stoch RSI. I did my best to forecast out what I think their future direction will be, based on their current trend angles/velocity and that gives us an idea of where the market is potentially heading. We also know that institutions and whales started to buy back into the market so confidence is growing at this price level that strengthens the possibility of this bear around the floor for the correction.
The possibility of a bullish recovery by early /mid June will be invalidated if any of the following occur:
Note for New Traders- What is a Bull Market? In my opinion - the minimum requirement for a crypto bull market is thta Bitcoin's price remains over the 20/21 week SMA/EMA, and over the 200 EMA and SMAs. If we remain over them, the market sentiment is generally bullish. When we fall under those, bearish market sentiment rises. We are going on our 10th day below those moving averages. The longest a bull market sat/ranged under these averages was around 2 weeks. The longer you remain under the averages, the greater the odds for a prolonged bear market, versus a short bear cycle within a larger bull market.
Background: Starting on 10 May, Bitcoin fell over 50% from a final rejection at ~60k to the deepest part of the correction on 19 May (~28.9k). From there Bitcoin quickly bounced back to over 40k before posting additional corrections and extreme volatility, ranging between 40k to 31k in the days that followed.
This triggered a massive dump of the altcoin market, some coins lost up to 70% of their value before the market began to stabilize on 24 May. The correction also liquidated billions of dollars in overleveraged positions as fear grew to levels not seen since the COVID black swan crash. While terrifying for new traders, this isn't unprecedented in crypto markets. This correction leaves the possibility of resuming the bull market at risk, and all eyes are on Bitcoin going into June.
What is Next? I'm watching the moving averages (20/21w and 200d); I'm watching the ADX and DI (Average Directional Index) and the Stoch RSI. I did my best to forecast out what I think their future direction will be, based on their current trend angles/velocity and that gives us an idea of where the market is potentially heading. We also know that institutions and whales started to buy back into the market so confidence is growing at this price level that strengthens the possibility of this bear around the floor for the correction.
- ADX/DI is currently converging into a netural trading action for buyers and sellers, this suggests we will enter a period of consolidation until either buyers or sellers break out. This also supports the U-shape recovery theory, in that the bottom of the U pattern will see price action stabilize and consolidate as traders strengthen their positions and either accumulate or distribute in anticipation of the upcoming breakout.
- Stoch RSI is finally showing signs of recovery after being extremely oversold for nearly 9 days. The RSI crossed bullish and is trending up. If our theory of a U-shaped recovery holds true, we'll see the RSI bounce around within it's neutral range reflecting weaker price action- some days being red, some days green. We will watch for a departure from this neutral RSI zone to indicate an imminent movement/breakout in price and we'll validate that possible breakout with increased volume indicators.
- From a fibonnacci perspective, the bull cycle's retracement (December to May) was over 70% at peak, but generally closed over the 62% level. 62% is the "golden fib" and a very healthy retracement target from a cycle peak. While further downside cannot be ruled out, this is a range that can be readily respected by the market and serve as a floor for price.
- The 20/21w and 200d moving averages, on their current paths, are converging at the latter half of our possible U-shape recovery. This indicates that Bitcoin's price action will meet the bull market's bottom MA supports around 6/7 May, at the 42k resistance level. It will take considerable strength by bulls to break through that range and close over the MAs and 42k resistsance. In this analyst's opinion if we can close over that, the odds of retaking 50k drastically increase, and the odds of resuming a bull market are also greatly increased.
The possibility of a bullish recovery by early /mid June will be invalidated if any of the following occur:
- We close below the U-shape channel for over a day
- We fail to close above 40k and continue to range/consolidate sideways beyond the U-shape.
Note for New Traders- What is a Bull Market? In my opinion - the minimum requirement for a crypto bull market is thta Bitcoin's price remains over the 20/21 week SMA/EMA, and over the 200 EMA and SMAs. If we remain over them, the market sentiment is generally bullish. When we fall under those, bearish market sentiment rises. We are going on our 10th day below those moving averages. The longest a bull market sat/ranged under these averages was around 2 weeks. The longer you remain under the averages, the greater the odds for a prolonged bear market, versus a short bear cycle within a larger bull market.
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