Over the last few weeks, bitcoin has had its fair share of ups and downs. The volatility has chopped up many of the public bulls and bears alike as the market has struggled to find a consistent direction for more than a couple of weeks at a time. The market is currently in an interesting space as many macro trends have been broken. One major trend that was broken last week was the macro demand line shown below:
Figure 1: BTC-USD, 12-HR Candles, Macro Supply Line Broken
The break of the supply represents a macro change of character for the market and is undoubtedly a bullish signal. After bottoming around $6,500, bitcoin had a very strong, sustained rally for a 40% market value increase over a relatively small amount of time. Currently, the market is experiencing some turbulence as we test well known resistance points where lots of overhanging is present. Our current price level is the beginning of the hypodermic trend we saw late last year as we broke free of the parabolic envelope shown below:
Figure 2: BTC-USD, 12-HR Candles, Hypodermic Trend Breakthrough
The Hypodermic Trend is where the FOMO, irrational buying began and left many investors holding underwater positions. This FOMO resulted in tons of overhanging supply and I don’t expect us to make any upward progress without a solid fight from the bitcoin bears.
This recent markup came about as a result of a solid accumulation phase on the 2-HR time frame that lead into reaccumulation and has now pushed us into a new trading range that is currently testing the overhanging supply. The figure below outlines the micro accumulation leading into our current trading range:
Figure 3: BTC-USD, 2-HR Candles, Micro Markup into New Trading Range
Our current trading illustrates the presence of supply by the sellers:
Figure 4: BTC-USD, 60-Min Candles, Current Trading Range
It is unclear whether this current trading range is distribution (top of the rally) or reaccumulation (temporary stop before a resumption of the uptrend), but what is clear is the presence of supply. And the presence of supply makes total sense given the current price level.
Whether the market is going to move up or down remains to be seen, but key price levels to watch are near the bottom of our current trading range in the $8,600s. A breakdown of that price level would likely send us retesting our macro lows in the $6,000s. If this current trading range breaks down, that will be an incredibly bearish signal as that indicates the overwhelming presence of supply in the market. If we manage to test the $6,000s, I find it highly unlikely that we rally without establishing new lows once again.
If we manage to establish a clear reaccumulation trading range and break upward, I expect to see resistance around the 50% Fibonacci value shown below:
Figure 5: BTC-USD, 12HR Candles, Macro Resistance
Summary:
- A major macro downtrend broke last week that marks a potential, new macro uptrend.
- A large amount of supply is present as we test the current price levels that also match the hypodermic breakout of last year’s parabolic trend.
- We are in a trading range and are testing supply as the market decides whether we will move up or down. Key price levels exist just above our trading range. If we reject those price levels and our current trading range, expect to see a retest of the macro low in the $6,500 range.
Published at Fri, 27 Apr 2018 18:17:50 +0000
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