Just many things that don't add up the past week since the Bitfinex dump. There was panic when the news came out, which looked very bad at first sight. But 4 days have passed with sideways price action, which is not really confirming that we have panic in the market. OI' back to it's level from before the dump as well now. Now assuming that many people have an account at Bitmex and have funds spread around many exhanges as well. Since Tether' was dropping again and prob most did not forget the Tether' dump half year ago, only option would have been to move to crypto (or Bitcoin). But since it's less easy to move to fiat, think we can assume that many people have hedged through Bitmex, since it's easy to do there. This would explain the big increase of OI there. When looking at ETH's OI', that one barely moved since the dump. That would confirm this theory.
Normally hedging means locking up your $ value, so it should not matter which way it goes you can't loose or win in $ if BTC' dumps or rallies. Let's say, someone has 100K capital spread around several exhanges. If he would want to hedge it like it should be, he should have 100K to hedge as well. So in other words, he should not leverage hedge 10K to 100K. Because this way he would risk getting liquidated if the price would move up a lot. Since OI increased so much (have not seen it increase this much after a dump like this, i am thinking maybe a lot of people simply hedged their assets. But OI can't increase if there also are not a lot of new longs as well. So who are these people who have bought 130 mil new longs since the low, with all the uncertainty of Bitfinex hanging above the market?
If you remember from my previous analysis, i saw a few big buys at the low (first half hour of the dump), like it were people who tried to stop the panic dump. I missed the first 20 min or so of the dump, but i saw one 5 mil market buy, which is 95% sure a buy and not a short closing, because i saw the OI increase that moment. Of course anyone could have done this, doesn't need to be a pro whale. But usually retail money, would short during the panic than go long. So for now my assumption is that it's smart money. Why would they be doing this? There can be several reasons. My first though was, supporting the price to stop a big dump. Because they were still looking at another wave up to like 6K before wanting to unload the bags. So a dump to 4800/4500 would cost them much more than supporting the price at these levels. In the hope to be able to unload at higher prices and decrease their risk.
To make things less complicated, short term think we can say that: If we move stable sideways/down for another 2 days or so, that a bullish outcome becomes more likely. Until then, bears are in favor!
Now i will explain the chart on the right. We can see a very similar shape as we have seen during other big drops. They are similar, but nr 2 shows this movement could take another week and than instead of a lower low we could see a double bottomish level instead. They do all tell us, that if we see a second drop, it has to be smaller (and therefore also less volume) than the previous one. So nr2 says we should hang like this for like another week or so then test 4900/4950 again. Nr1 says, we drop withing 2 days or so and test 4750/4900 again. 2 weeks ago i gave 4700 as a good support level, week later i adjusted it to 4800. So for not having too many variables, i would say 4800ish should be the max and not 4700. If we see another big drop happen, like again 500 points or so, than we can most likely say goodbye already to the rally from the past 3 months.
So bears are in favor now, that is clear. But the longer this takes and if the drops start to stay small and seem a bit controlled like they have been past days, than i would start to worry a bit. For the bulls, i would sit it out and wait for my description for the coming 2 days or so to play out. Even if we do see the blue line play out on the left, there are still a few factors that we can not see upfront, to judge if it's just a correctional (shake out) move before a dump again or that we will continue the rally again. And as if we don't have enough factors playing a role already, we still have Bitfinex and Tether hanging above the market as well.
Please don't forget to like if you appreciate this :)
Previous analysis:
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Bitcoin fractal:
The one i talked about the past weeks but unfortunately not in play anymore
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If it can hold the 5170ish coming hour or so, make a bull flag, could be the start of a Bart move up. So safe play would be waiting, seeing volume be a bit higher than past days as well, seeing nice bull flag form. As I described in my Bart move educational post
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Nice :)
Okay, in theory the bear flag is still in play, but it has become a much different one. So i prefer to see it has failed already. If the bulls are able to keep it around these levels for the coming half day or (or less), than it will become much more likely that bearish movement is over for at least the short term. So seeing price hang around the upside of a bear flag, indicates it will prob fail. If we see some rejection, push to maybe 5150 withing an hour or 2, would but the flag in play again. So we need one more push above the 5300ish for the bulls to feel safer.
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That flag/wedge played out perfectly creating another push up. The target of that flag has been reached already as well. So at this point, anything can happen. Going to try and write a new analysis later on. Would be careful at this point, btc is moving up but alts don't feel like it. So even if we continue up, a wick (a shake out) is very likely to happen as well
"...making a Bear flag or preparing for a Bart move up ?"
You can't know, and it's no use asking. Just place your bet and pray. ;-)
botje11
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@ReallyMe, You can know, at least increase your odds, you just need to know what to look at and need to see.
ReallyMe
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@botje11, Maybe. Maybe not. My point being, whether Bitcoin will move up or down is actually random.
What us humans do, in advance you can provide good reasons for both. And in retrospect, you can find a good justification for why one particular move happened, and not the other.
But that does not change the fact that the move was actually random.
Us, humans, tend to explain random outcomes as non-random. We overestimate causality, e.g., we see elephants in the clouds instead of understanding that they are in fact randomly shaped clouds that appear to our eyes as elephants.
botje11
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@ReallyMe, There are patterns to be found that work really good. There is never one that works 100%, but there are several that work 70/80% of the time. You need to be able to distinguish the right one. Not only the pattern itself, you need to have it at the right spot as well, meaning at the high or low or middle. I can tell you upfront, all the text book basic patterns don't work, might not even profit from them. But you need to be able to filter them to get a few percentages in your favor each filter you find. Finding these filters has been my nr 1 job in my trading career. Because you are right, moves are random, but there are even patterns to be find in these random moves. What appears to be random for one person might not be random for someone else. For example, wedges can be found in maybe 10 different shapes and stages, while for me personally i prefer only 1 of these, while i see most people use all 10 as if they are the same. Same goes for other patterns.
ReallyMe
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@botje11, Fair enough. Although I doubt that 70-80% is actually achieved objectively. For this one would have to trade this pattern over a very long period again and again. 70-80% would be a license to print money. ;-) If you have applied it 10 times and it has worked 8 times, it does not mean that this pattern works in 80% of the cases. Just as some 10 coin throws can be 8 heads and 2 tails, the next 10 throws can make 3 heads and 7 tails and so on ... you see what I mean. The "felt" success rate is not always the true, objective success rate. Well, whatever. Good luck! ;-)
mbc47
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@ReallyMe, I truly enjoyed reading you both. Now, let's be patient and buy some cheap bitcoin..
ReallyMe
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@momtchev, Agreed. Unless today's cheap will be worth half the price tomorrow. ;-)
mbc47
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@ReallyMe, Well, you know how hard it is to catch the bottom.
Have your strategy ready. Average out - I believe we'll be very happy in 2020
ReallyMe
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@momtchev, You will never catch "the bottom", it's not important, either. Much more important is to understand that the averaging on the way down will lead you long-term into disaster youtube.com/watch?v=ZsNnO3Q3XoQ&t=224 Average on the way up, never on the way down.
mbc47
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@ReallyMe, OK - I see your point, and I agree it is much smarter to buy on the way up when support below you..
Crypto is weird though - admit it. So, I will buy some amount at 4700-4800 and observe MAs to decide how to add more.
That way when another dude buys 20,000 BTC which is very likely to happen when < 4700 you have some..
I do believe in crypto - all that FUD is nonsense. I will be selling BTC above 10K after I buy it below 5K
You can't know, and it's no use asking. Just place your bet and pray. ;-)