What's the upside for Bitcoin? Technical Outlook, Edition #214 (17/05/2022)
Crypto might be down but it's definitely not out 🚀 Q assesses the latest for Bitcoin in light of the Terra ecosystem's collapse... Find out what's next for cryptocurrency in the #FreeAlpha 👇
Bitcoin: A silver lining in a cloud of despair?
Q won't sugar coat things.
The situation has been far less than ideal. And for some, there seems to be no end in sight.
After the shocking turn of events that rocked the cryptocurrency community, the real tragedy lies with the average investors that suffered at the hands of unseen forces and the massive blow to confidence in this vibrant and exciting space.
Many traders and investors out there wallow in this stench of despair that hangs over markets like a thick cloud.
But, to what end?
The Dot Com crash in the late 1990s was devastating for many investors, where insurmountable losses piled up quickly after the hard reckoning which followed the tech-stock bubble popping and faced by many companies and their stockholders.
However, the world soon arose from the painful experience. We saw the birth of a new golden 'digital' age rise from the ashes and innovation flourish at an unimaginable rate.
That magical handheld (or desktop) device you're reading from is a byproduct of this technological age, aka 'Web 2.0'!
In the grand scheme of things, price action simply tells an intricately beautiful and highly compelling narrative for the crypto practitioner to assess. If the chances for success appear sound, technical analysis of price action can offer clues for the practitioner to take action.
This is why it is so critical not to lose sight of an important fact. History shows that the force of innovation is near unstoppable.
And for digital assets like cryptocurrency, we're only just getting started 👇
Turning our attention to the next opportunity, let us begin this assessment with an overview of Bitcoin's position. The analysis will then attempt to identify an ideal roadmap for the most prominent cryptocurrency's next step.
Click here to find out why crypto markets crashed last week. Get the low-down behind the tragic collapse of $LUNA and $UST with our detailed step-by-step analysis in Destabilising Stablecoins, On-Chain Outlook👉
Technical Analysis: Bitcoin in Focus
Bitcoin ($BTC) has fallen to lows of US$ 25,4XX.
This drive downside is partly motivated by fears of $UST losing its peg against dollar parity.
In this case, parity refers to 1 UST = 1 USD.
Do Kwon, the embattled founder of Terra Labs, appears to have liquidated over 80,000 BTC from the treasury in an attempt to restore stability.
In light of recent volatility, breaking down how the earlier price action aligns with the macro BTC/USD trading pair is a crucial first step. Thus, our deep-dive will begin with the monthly (M1) timeframe, using logarithmic and linear charting scales as confluence in conjunction with major horizontal support and resistance zones.
For accuracy's sake, let us extrapolate the data from the BLX, BraveNewCoin Liquid Index.
Its highly comprehensive price data is the reason for using the BLX index, which has kept track of Bitcoin's prices since its inception.
BraveNewCoin Liquid Index, BLX - Monthly (M1), Logarithmic Scale
Notably, $BTC has never closed below the 50-month moving average (M1 50 MA, RED). The indicator is currently positioned around levels at US$ 21K.
Grabs at liquidity that occur during 'black swan' market events such as the COVID Crash of March 2020 saw prices punch below the M1 50 MA.
Yet, bears failed to hold down long enough to produce a candle close, keeping the uptrend intact.
Now, we zoom in to the weekly view (W1).
Examine the weekly chart below.
It is hardly surprising to see the W1 200 MA (BLUE) also hovering around US$ 22K, hinting at further supporting confluence staggered around this zone.
BraveNewCoin Liquid Index, BLX - Weekly (W1), Linear Scale
Take stock of both the horizontal and sloped support.
Now observe the resistance levels depicted above. Again, an enormous descending wedge hints at the support zone around US$ 21K - 22K appearing to hold an ample amount of demand.
For the time being, the .618 Fibonacci retracement level maintains rationale for support. Meanwhile, the 0.5 retracement level serves as an indicator of short-term resistance.
It is essential to consider the risks of an adverse trend reversal.
Sharp candle wicks below the M1 50 MA are still conceivable. Therefore, the markets should remain guarded against another sporadic market event.
For example, an even more aggressive US Federal Reserve engaging in faster rate hikes.
Liquidity grabs anywhere between US$ 14K - 17K are plausible, with the macro .786 Fibonacci retracement level indicating levels.
Considering past performance, which is by no means an indicator of the future, speculators have looked at levels below the M1 50 MA around US$ 21K as undervalued. Hence, practitioners of technical analysis may deem this a buying opportunity.
BraveNewCoin Liquid Index, BLX - Weekly (W1), Linear Scale
As it stands on the daily charts, the macro .618 retracement level is holding around US$ 28.8K.
This translates into a potential support zone.
It is also encouraging to see a remarkably reflexive bounce from the US$ 25.4K lows that resulted in the key .618 retracement level being reclaimed and respected ever since.
BraveNewCoin Liquid Index, BLX - Daily (D1), Linear Scale
There is a "bit of an uphill battle” (pun intended) with shorter-term resistance at the D1 20 EMA (GREEN) and 0.5 retracement level (RED).
Reclaiming those two levels would be a terrific omen for market bulls. However, lower timeframes are beginning to flatline, meaning a re-test of the lows could be on the cards.
Bitcoin vs. US Dollar, $BTC - 4 Hour (H4)
Either a break to the upside—or break downside—looks to rely on the performance of the Nasdaq 100.
The stock index that tracks the top US technology stocks on the Nasdaq appears to serve as a correlated proxy for Bitcoin.
In layman's terms, the US100 should lead the way for BTC to follow.
US Tech Nasdaq 100, US100 - 4 Hour (H4)
See you again for the next update.
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