Bitcoin - Is this the bottom?
How can you predict the bottom with all this noise?
A lot of people are calling the June low of around $17,600 as the bottom!! So, let's take a look at the charts and the global economic fundamentals and decide for ourselves.
As you all know I do not trade purely off of technical analysis. There is far more to the big picture then looking at the charts. When looking for a long-term trend change in an asset - BTC on this occasion, I look at three things:
1. Seasonal Trends - The most underrated source used by traders
2. Fundamental analysis
3. Technical analysis
1. Season Trends - There are a lot of great charts showing the seasonality of bitcoin (I encourage you to look at some). Bitcoin seasonality hinges on one thing.... BTC halving. So, every 4 years (or there abouts) we have three seasonal periods, upswing, downswing and accumulation phase. So, breaking down these three phases helps us predict where we are on the BTC price rollercoaster. Luckily for us these phases have relatively constant timeframes if we look at past performance. Upswings last anywhere from 14-18 months, downswings last anywhere from 12-14 months and accumulation phases last around 16 months. Now this doesn't mean that seasonality trends cannot change but we would be doing ourselves an injustice if we didn't consider past performance and trends not only in price action, but time also.
As we are trying to predict the bottom we will be concentrating on the downswing for the current cycle. BTC began this downswing in November 2021. Currently we sit around 10.5 months into the bear market. This means we are getting close to hitting the seasonal bottom. Within reason.... we can predict the bottom to eventuate around November/December 2022, give or take a month or two either way. The only difference between previous BTC downswings and the current bear market is the global economic climate. Personally, I don't believe this will affect the initial timing of the bottom. I do however believe that this will impact the time in which we stay in the bottoming range. The possibility of an elongated bottom is very real.
2. Fundamental analysis - Let's look at the overall economic climate as this directly correlates to the markets. Interest rates are on the rise, inflation is out of control, and this is putting downwards pressure on the markets. Put simply, The US will be in a recession soon. What does this mean? For me, it means that we haven't seen the end to our market sell offs. There is still more room for correction. As long as interest rates rise, and inflation is out of control we will continue to see the US Dollar rise from current levels at 113 to 120, which will put downward pressure on all markets including BTC. Not to mention the flow of fresh capital into the markets will be at an all-time low as people are forced to battle everyday inflationary costs and increased interest rates on their loans.
Now I am not all doom and gloom. People read recession and think the markets are crashing to 0 and we will all be eating rationed tinned food for the next 5 years. Let's put this all into perspective. I actually think the Fed and other countries have increased their interest rates at such an accelerated rate that we are only in for another 2-3 rate hikes over the next couple of years. No matter the season we're in people tend to exaggerate the facts. When Rates are increasing at rates not seen for decades, people think it will never end. But it does end, and, in this case, I believe we will keep rates balanced heading into the middle of next year.
This tells me that our markets still have some headwinds over the next 6 or so months. Whether we free fall to our market bottoms and stay there for a prolonged period or whether we continue to free fall over the next 6 months remains to be seen.
3. Technical analysis - If we now turn to the charts, we can see that we remain in our green descending channel since BTC entered this bear market. We can also see that we are now at a decision point for BTC as we approach the upper green trend channel line. Do we break out of this trend, or will we continue our next leg down? Given the strength of the dollar and the state of stock and commodity markets worldwide I would be confident of another move lower within the green channel.
If we also turn to Elliot wave theory this backs our notion for continued downside. We have completed the first 4 of 5 waves to the downside. With the last wave due at any point in time, it would make sense for the next leg to complete our major bear market move since the November highs of 2021.
Now if we look at the current monthly candle structure (I know this chart is shown in weekly) we are close to the monthly close for Sep. The pivotal level at play here is the previous BTC high of just under 20k. If the current monthly candle closes below this level, expect a sharp decline to the 12k region.
Last but not least I want to touch on the BTC whales. Most prudent crypto investor/traders are aware of their continued control over the price of BTC... Well, more control than the major players of other markets. In the past a telling sign of the end of a BTC bear market was an increase in whale BTC wallets. We are still seeing a decline in whales' BTC wallets which for me is a sure sign of more downward pressure....
All of these factors of confluence are telling me that the bottom is not yet in. We still have a way to go.
The one positive for folks who believe BTC has bottomed, is that BTC has held relatively strong recently with the strength of the US Dollar, however this cannot continue forever.
The bottom is yet to be seen! Trading is not always about our skill and wisdom with the charts, it's a game of patience and mental strength to outlast the markets. Don't enter too early by catching a falling knife, that is what the markets want!
A lot of people are calling the June low of around $17,600 as the bottom!! So, let's take a look at the charts and the global economic fundamentals and decide for ourselves.
As you all know I do not trade purely off of technical analysis. There is far more to the big picture then looking at the charts. When looking for a long-term trend change in an asset - BTC on this occasion, I look at three things:
1. Seasonal Trends - The most underrated source used by traders
2. Fundamental analysis
3. Technical analysis
1. Season Trends - There are a lot of great charts showing the seasonality of bitcoin (I encourage you to look at some). Bitcoin seasonality hinges on one thing.... BTC halving. So, every 4 years (or there abouts) we have three seasonal periods, upswing, downswing and accumulation phase. So, breaking down these three phases helps us predict where we are on the BTC price rollercoaster. Luckily for us these phases have relatively constant timeframes if we look at past performance. Upswings last anywhere from 14-18 months, downswings last anywhere from 12-14 months and accumulation phases last around 16 months. Now this doesn't mean that seasonality trends cannot change but we would be doing ourselves an injustice if we didn't consider past performance and trends not only in price action, but time also.
As we are trying to predict the bottom we will be concentrating on the downswing for the current cycle. BTC began this downswing in November 2021. Currently we sit around 10.5 months into the bear market. This means we are getting close to hitting the seasonal bottom. Within reason.... we can predict the bottom to eventuate around November/December 2022, give or take a month or two either way. The only difference between previous BTC downswings and the current bear market is the global economic climate. Personally, I don't believe this will affect the initial timing of the bottom. I do however believe that this will impact the time in which we stay in the bottoming range. The possibility of an elongated bottom is very real.
2. Fundamental analysis - Let's look at the overall economic climate as this directly correlates to the markets. Interest rates are on the rise, inflation is out of control, and this is putting downwards pressure on the markets. Put simply, The US will be in a recession soon. What does this mean? For me, it means that we haven't seen the end to our market sell offs. There is still more room for correction. As long as interest rates rise, and inflation is out of control we will continue to see the US Dollar rise from current levels at 113 to 120, which will put downward pressure on all markets including BTC. Not to mention the flow of fresh capital into the markets will be at an all-time low as people are forced to battle everyday inflationary costs and increased interest rates on their loans.
Now I am not all doom and gloom. People read recession and think the markets are crashing to 0 and we will all be eating rationed tinned food for the next 5 years. Let's put this all into perspective. I actually think the Fed and other countries have increased their interest rates at such an accelerated rate that we are only in for another 2-3 rate hikes over the next couple of years. No matter the season we're in people tend to exaggerate the facts. When Rates are increasing at rates not seen for decades, people think it will never end. But it does end, and, in this case, I believe we will keep rates balanced heading into the middle of next year.
This tells me that our markets still have some headwinds over the next 6 or so months. Whether we free fall to our market bottoms and stay there for a prolonged period or whether we continue to free fall over the next 6 months remains to be seen.
3. Technical analysis - If we now turn to the charts, we can see that we remain in our green descending channel since BTC entered this bear market. We can also see that we are now at a decision point for BTC as we approach the upper green trend channel line. Do we break out of this trend, or will we continue our next leg down? Given the strength of the dollar and the state of stock and commodity markets worldwide I would be confident of another move lower within the green channel.
If we also turn to Elliot wave theory this backs our notion for continued downside. We have completed the first 4 of 5 waves to the downside. With the last wave due at any point in time, it would make sense for the next leg to complete our major bear market move since the November highs of 2021.
Now if we look at the current monthly candle structure (I know this chart is shown in weekly) we are close to the monthly close for Sep. The pivotal level at play here is the previous BTC high of just under 20k. If the current monthly candle closes below this level, expect a sharp decline to the 12k region.
Last but not least I want to touch on the BTC whales. Most prudent crypto investor/traders are aware of their continued control over the price of BTC... Well, more control than the major players of other markets. In the past a telling sign of the end of a BTC bear market was an increase in whale BTC wallets. We are still seeing a decline in whales' BTC wallets which for me is a sure sign of more downward pressure....
All of these factors of confluence are telling me that the bottom is not yet in. We still have a way to go.
The one positive for folks who believe BTC has bottomed, is that BTC has held relatively strong recently with the strength of the US Dollar, however this cannot continue forever.
The bottom is yet to be seen! Trading is not always about our skill and wisdom with the charts, it's a game of patience and mental strength to outlast the markets. Don't enter too early by catching a falling knife, that is what the markets want!
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