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Saturday, September 26, 2020

Bitcoin is as neutral as it gets, so patience pays!

Bitcoin is as neutral as it gets, so patience pays!

Bitcoin / U.S. dollar BITSTAMP:BTCUSD

In this analysis I will go through the various trends, fundamentals and data around Bitcoin and the macro situation. It will have more of a bearish note because I think there are several people should be aware of and play safe.

At the moment the USD is in an uptrend and all risk assets have sold off. SPX down 8%, NDX 11%, Gold 10%, Silver 24%, Bitcoin 14%, Altcoins 40%. In my opinion the USD uptrend and the risk asset downtrend is 60-70% complete, so there is an extra 30-40% move to the downside for most before they put a bottom in. I've said many times in the past that I believe the various bull markets aren't over and that BTC will hit 20k over the next 3-6 months, but of course I could be very wrong. So far I've been bearish since pretty much the very top and I can't say I've seen anything that tells me the bottom is in, let alone claim with certainty that things won't go down even further!

Now let's get into the bullish stuff and why I think there is more upside. First of all let me clarify that Bitcoin is technically not in a downtrend. Yes it has had 2 LLs and 2 LLs but we haven't gotten a confirmation yet. It is currenctly above its Feb pre-crash high, it is still above its broken diagonal (old resistance) and still above its diagonal support line. With the flood of stablecoins, with the fact that we are several months after the halving and the pretty long and strong alt season is over... It means the time for Bitcoin is pretty close. Most on chain data are bullish , funding is negative, premiums are relatively low and temporarily got below 0 a few weeks ago, the gap was almost filled and stocks seem to be bouncing. Nasdaq could get up to 11700 to fill all gaps and sweep the triple top before going lower, while EURUSD could get up to 1.175-1.183 before going lower. This is telling me that Bitcoin could get to 11500 and then drop again / consolidate before it makes a decisive break to the downside or upside. Until it closes above 11500 I'd personally wait.

As for the bearish case I'll lay all my arguments one by one... which might not be as strong as the ones above, however I don't think they should be ignored.

1) We got a perfect top at the perfect spot. First we filled/tested all the gaps/untested areas on the way up, hit R1 Yearly Fib, formed a double top , swept all the highs and got up to the average high of June 2019

2) On the way down all break downs have been tested, both with an SFP (11100-11200 and 10800)

3) The gap at 9800 hasn't been fully filled

4) Right above the gap there is a double bottom which means the price could go there to fill the gap and sweep the bottom. On some exchanges/pairs the lows where swept, but not all.

5) 9200 is the most important area right now as it has the 200 DMA and is the VP PoC . It isn't the PoC on all exchanges, but on many exchanges, USDT pairs, Perpetuals and so on it actually is. At the same time there are two other high volume nodes that haven't been tested on the way up, which are 7300 and 7900.

6) 5400, 7300, 7900, 9200 & 9800 are some voids/untested areas/gaps (call them however you like), which someone could say are acting like magnets.

7) The 128 DMA has been tested too many times, while the 50 DMA is trending down.

8) The 8000-8200 bottom was great, but it was anomalous, occured on a weekend and it came of a multiple indicator combo (200 DMA, 128 DMA, Yearly Pivot , pre 50% drop local top, 8100 HVN ) which has me thinking that everyone that easily bought that bottom has to be shaken out. This coupled with the fact that it looks a bit like a bouble bottom on LTFs and is above a key untested level is quite bearish .

9) Bitcoin Long/Shorts remain very high on Bitfinex and there are no shorts to squeeze. On gate the ratio is 2:1 and OKex 0.8:1, so not that high and definitely not as high as before the crash... But when coupled with the still positive premiums while funding remains negative, it shows that something has changed.

10) Not only what was mentioned on no. 9, but usually when premiums go quite positive they then go negative by about the same amount. Historically even in bull markets we've seen premiums go to -3%, -8% and even more than -15% before a bottom is in. Essentially 9 & 10 are telling me that there is a high chance we shake out all those longs before a strong rally.

11) Bitcoin wasn't ready to break out. It was forced to move faster than it did in 2016 because everything was going up. The Covid crash messed up the cycle, and as the space is dominated by retail (who have been hurt the most) it might need some extra time. So far it is pretty much at the same levels as it was in Q4 2016 before it had a strong rally

12) Based on my analysis of several valuation models and indicators, I think that the fair/cheap price for Bitcoin right now is at 8-9k which means that going to that price definitely isn't impossible.

13) Altcoins are in a downtrend. In my view their current bounce is probably just a dead cat one, which maybe has some extra room to the upside. The truth is that there are even more altcoin longs than Bitcoin and even more dumping/dilution going on, something that could affect Bitcoin short term

14) Finally the worst case scenario I see is that Ethereum , Litecoin and some others have formed mega double bottoms and while they have some very important untested areas lower (i.e Ethereum double bottom around 80$ and untested areas 56 + 20). Bitcoin also has a double/triple bottom at 3-4k from Dec 2018 up to Mar 2020, while right below it there is a HVN at 2500 which probably should had been tested before the bottom was in.

To close things up, I am not saying this is going to happen, but people need to remember that global stock markets have been in a depression for many years and that Central banks have done nothing to fix the problems (talked about it on my previous idea and will write a larger on specifically about it). Even if Bitcoin and Crypto most likely outperform everything, bounce harder than everything after a correction and so on... we need to remember that in the short term if everything goes to shit Bitcoin will most likely follow. Once again for now another 30-40% move for BTC would mean that at least 9800-9200 are in the cards, however as Bitcoin tends to be more volatile it has the potential to spike lower and then get back up quickly. Bitcoin and altcoins are the best performing asset class of 2020 (once again), as Bitcoin is up 150% from its CME bottom, 50% YTD, is sitting above its Feb high and all that while most altcoins pumped 4-200x from their lows... So a deeper correction would actually be beneficial as it would shake out the leveraged longs and clear the path for 20k.

PS if you want to read more of my work or find more crypto talent (Crypto coaches etc), visit Cryptocube(. io ) and see your potential cubed :)

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