Bitcoin: the big short squeeze & continuation of the trend (25K)
Updated
Interesting play by the market makers on Friday where we saw a stop hunt drop in the brink's box (pre market New York) in order to send it during the session.
Most of retail was fearful at 40K just over a week ago and euphoric a week later at the same price; "the bottom is in" and I've seen the "100K" posts again. Too funny. But this exactly how market makers work their price action; simply inducing people to step in and provide liquidity. Once you have committed, the market maker is in control and has options to source your liquidity - up or down.
The 10% pump in the New York session was based on positive news on the non-farm payroll which smashed its projections as well as strong results from AMZN and SNAP. The first can not be seen as good news as it will give the fed even more reason for aggressive rate hikes. The fed futures market represented this sentiment and ripped lower. The latter (SNAP & AMZN) supported the American indexes during a turbulent week.
Now, let's talk crypto. Is this the market reversal the bulls have been waiting for? In my opinion: no. What I see is a weekly mean reversion and a short squeeze. With the next FOMC coming up in March and definitely announcing a rate hike, what I see here is position building of the market maker in anticipation for March. In crypto, building shorts is easy for market makers, print a fat green candle and the whole market is long and thus the market maker builds his shorts. In just one day, only the Bitcoin bulls have dropped 22BN(!) of long liquidations between 30 and 40K, an area for a future visit.
As I mentioned in one of my previous ideas I did anticipate a green February in order to release liquidity to the downside in March / April. On the chart we can see we are in wave 4 which I expect to mature during February in order to start wave 5 and capitulation in March or April. At this very moment we are still below the daily and weekly 50 EMA as well as the bull market support band - so definitely not a time for extreme bullishness. Resistance for wave 4 will likely be found between 45 and 50K with special interest for the 46K and the 50K mark which represent sigma levels to the upside. Another point of interest is the 365 day EMA which represents our yearly mean and acts as a resistance area to create a new impulse to the downside.
For a revamped bull market, the only way out would be a less hawkish fed with no interest rate hike in March. An unlikely scenario, yet a scenario to take into account.
Given we are well into the mark down phase, potential bottom targets come to light with special interest for the target out of the bigger M formation (wave 3 & 5, neckline at 4) which would be around the 25,6K level. This could be a potential Bitcoin macro bottom depending on some further developments on regulation around the world's biggest crypto currency. However, my concern lies with the fact we have not consolidated between 19K (2017 ATH) and 30K (bottom July 2021). Thus, a spring towards 19/20K can not be excluded and a tap of the 1095 day (4 years) EMA would suffice to call this area the "real bottom".
Conclusion, in my opinion we will see more green in February, sourcing as much liquidity to the upside while building positions (market maker shorts) to the downside. We could realistically expect market makers to start a new impulse to the downside a week (or two?) before the FOMC in March. Targets for the end of February will rely on the action in the options market with a big expiration of Feb 28th. Likely zone of interest for February's expiration would be between 42 - 46K, a scenario that would induce more bullish calls for the March expiration (which currently inhibits the most open interest) and thus a lower max pain price.
Expect rain on the sunniest of days.
IMPORTANT: this is not financial advice, trade or invest based on your own risk and research.
Most of retail was fearful at 40K just over a week ago and euphoric a week later at the same price; "the bottom is in" and I've seen the "100K" posts again. Too funny. But this exactly how market makers work their price action; simply inducing people to step in and provide liquidity. Once you have committed, the market maker is in control and has options to source your liquidity - up or down.
The 10% pump in the New York session was based on positive news on the non-farm payroll which smashed its projections as well as strong results from AMZN and SNAP. The first can not be seen as good news as it will give the fed even more reason for aggressive rate hikes. The fed futures market represented this sentiment and ripped lower. The latter (SNAP & AMZN) supported the American indexes during a turbulent week.
Now, let's talk crypto. Is this the market reversal the bulls have been waiting for? In my opinion: no. What I see is a weekly mean reversion and a short squeeze. With the next FOMC coming up in March and definitely announcing a rate hike, what I see here is position building of the market maker in anticipation for March. In crypto, building shorts is easy for market makers, print a fat green candle and the whole market is long and thus the market maker builds his shorts. In just one day, only the Bitcoin bulls have dropped 22BN(!) of long liquidations between 30 and 40K, an area for a future visit.
As I mentioned in one of my previous ideas I did anticipate a green February in order to release liquidity to the downside in March / April. On the chart we can see we are in wave 4 which I expect to mature during February in order to start wave 5 and capitulation in March or April. At this very moment we are still below the daily and weekly 50 EMA as well as the bull market support band - so definitely not a time for extreme bullishness. Resistance for wave 4 will likely be found between 45 and 50K with special interest for the 46K and the 50K mark which represent sigma levels to the upside. Another point of interest is the 365 day EMA which represents our yearly mean and acts as a resistance area to create a new impulse to the downside.
For a revamped bull market, the only way out would be a less hawkish fed with no interest rate hike in March. An unlikely scenario, yet a scenario to take into account.
Given we are well into the mark down phase, potential bottom targets come to light with special interest for the target out of the bigger M formation (wave 3 & 5, neckline at 4) which would be around the 25,6K level. This could be a potential Bitcoin macro bottom depending on some further developments on regulation around the world's biggest crypto currency. However, my concern lies with the fact we have not consolidated between 19K (2017 ATH) and 30K (bottom July 2021). Thus, a spring towards 19/20K can not be excluded and a tap of the 1095 day (4 years) EMA would suffice to call this area the "real bottom".
Conclusion, in my opinion we will see more green in February, sourcing as much liquidity to the upside while building positions (market maker shorts) to the downside. We could realistically expect market makers to start a new impulse to the downside a week (or two?) before the FOMC in March. Targets for the end of February will rely on the action in the options market with a big expiration of Feb 28th. Likely zone of interest for February's expiration would be between 42 - 46K, a scenario that would induce more bullish calls for the March expiration (which currently inhibits the most open interest) and thus a lower max pain price.
Expect rain on the sunniest of days.
IMPORTANT: this is not financial advice, trade or invest based on your own risk and research.
Note
correction: 4 year EMA is 1460 daysNote
Time to pay attention!Note
WARNING: Markets havent been this shaky since March 2020. There’s talk of an emergency interestvrate hike by the fed. Rumors, though, could happen on Monday. We have the Super Bowl this weekend aswell. I am still 100% in stables. If BTC breaks 40K again in the coming weeks, another big dump might be coming.Note
Target reached. See my new analysis for an update.
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