VictorCobra

Setting Up For A Bear Trap - Taking The Uncomfortable Trade

Long
COINBASE:BTCUSD   Bitcoin / U.S. Dollar
In the above chart, I've drawn attention to periods where BTC /USD volume on Coinbase declined to current levels. Even today, during this move below $30k, volume is fairly low. In this market, the most important thing is liquidity. When volume dries up like this, it's a lot harder for larger players to get the price they want (whether it's to buy or sell). I wrote an article about liquidity not too long ago. When volume declines to low levels, it means the market has become disinterested at current prices. This often means price will need to exit the range to the upside or downside. The green boxes show periods where price moved upwards shortly after the volume decline. Red shows moments where price moved down. The $6k descending triangle is a classic example of bearish continuation after buyer exhaustion.

It's been a long week, so I apologize if this analysis comes out a bit disorganized. Anyway, I'm not saying that a move up WILL happen here. In fact, I do my best not to speak in absolutes, since the world is always changing. What I do know is that it can pay off to prepare for the unexpected, and it can especially pay off to do the exact opposite from what the herd is telling me to do. I've seen many analyses recently calling for a violent breakdown. Bears seem fairly euphoric as well, with the fear/greed index lingering at historic lows for the longest period in this market's history. And indeed, Bitcoin has broken down from the small channel I've been watching AND my purple trendline. Shorting seems very obvious here, as every $1000 level is quickly become resistance. It's almost too obvious. And volume is now increasing. My own personal sentiment is the opposite of how it was when Bitcoin was above $60k.
On my Gemini chart, there is a trendline which shows that Bitcoin can also head slightly lower and produce a failed low. A breakdown below that trendline could also present the same target I have on Coinbase - near $24-25k.
Based on this, if we are to see bearish continuation this week, I expect Bitcoin to drop towards the mid-low $20k's. There is a secondary purple trendline on my Coinbase chart, where I've placed a red X for a potential reversal zone. Price can drop even lower than that and recover back above the trendline. Perhaps we really do need to see another "panic low." But on the bullish side, I am still holding out for a test of mid-$40k's, so I set a target at the important $46k level. If Bitcoin is to resume a bullish trend , I believe it first needs to break and hold $46k convincingly for several weeks. Below is what I'd expect to see, if we somehow get bullish continuation later this year. Something like this can also occur with a brief test of the lower purple trendline
Taking the uncomfortable trade is to buy at these levels. It genuinely feels bad. I've done it several times over the last couple months, and even added a little more today. I am prepared to add lower if necessary as well. I also acknowledge my mistake in not reducing risk when the market was at higher levels (though I'm still well in profit, since purchasing during the last bear market). This is an adventure for me, and a good lesson to learn as a young adult. I recognize the possibility that crypto valuations collapse as a result of too much leverage in the system––my most recent post is about this. I am still leaning towards reducing some risk at the $46k level, if we get there.

This is not financial advice. These are just my thoughts, and they should be used for speculation/entertainment only.

-Victor Cobra

Comment: And…voila. Bear trap. Selling below $30k would have indeed been a poor choice, at least in the short term. Seemed almost too obvious. Now we have to see how price reacts to $32-33k. Weren’t they supposed to be resistance? Didn’t every $1k level get turned into resistance? Why are we suddenly above $31k? Volume matters, and it just wasn’t a convincing breakdown yet. Chart updates today.
Comment: Volume is low, but price is back in the small wedge, after breaking below yesterday. Still needs to get above the purple trendline and break out of the wedge for further price appreciation. And this needs to happen with volume. Above $33k-34k, and things will become even more interesting. $35k is the main level to break, if Bitcoin is to test the $40k's.
Comment: Funding is still very negative on Binance futures, which is quite interesting. This could provide fuel for a bit of a short squeeze. Volume hasn't even come in yet, showing how little interest there really is, at current prices. Normally a bearish retest of a prior support occurs on low volume, except funding tells me that this is being overwhelmingly shorted.
Comment: So far rejected from the purple trendline. The biggest resistance here should be around the 33k level, for this reason.
Comment: Well, looks like Bitcoin cleared $33k and $35k fairly easily. That’s what happens when volume drops off and liquidity dries out in a range. Holding above $38k is pretty important, but I especially don’t want to see price roll back over and drop below $35k again.

The consistent negative funding on Binance futures ended up correctly predicting a short squeeze, which took price on the exchange briefly up to $48.1K.
Comment: Video update:

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