Why The Bitcoin Market Is About To Crash

Bitcoin is still consolidating at support. I typically don't like to see price grind sideways along an area of support. It indicates that there isn't violent demand in that area. If we see fierce demand, we will see a move away from that area of liquidity.

As we have yet to see Bitcoin v-bottom away from this support area, the longer we grind it, the more likely we will fall through it.

However, we are still at support. Potential trade ideas await confirmation on a lower time frame like the hourly to spot an early breakdown of support and look for the short trade down to 23K - the measured movement for our Head and Shoulders pattern we previously identified.

Conversely, since we are at support, the lower timeframes will give an entry opportunity earlier if we spot price break to the upside, where we'd like to see price hit at least $27.3K, our current Bottom Feeder active target.

Looking on-chain for evidence of Bitcoin's potential breakdown, we turn to New Addresses Momentum.

In the past, I've used this indicator many times to alert us to a new influx of Bitcoin users. As the pace of new addresses outpaces the yearly average, we can infer that more active market participants engage with the Bitcoin blockchain, infusing fresh capital into the ecosystem and fueling a continued uptrend.

However, Address Momentum is doing something different than it has for this current run. Notice how it's taken a nose-dive all of a sudden. Historically, this precedes a downtrend in price.

We've analyzed the anatomy of a bull market. In all previous cases, we've rallied off the bottom powerfully before reaching a local top and downtrending to establish our higher low for the cycle, and then we're off to the races.

While this is not conclusive evidence that our current rally is over, it is a warning that it would behoove us to pay attention. This may begin the local sell-off to $17-$20K (if not just the $23.2K target of the Head and Shoulders pattern).

Strategies? Consider hedging your Bitcoin holdings for a Futures Short soon. Or, consider buying Puts on your position through LedgerX or utilizing on-chain options platforms.

Also another chart that is important to pay attention to is Glassnode's Exchange Volume Momentum. We can identify our market cycle by comparing the monthly average of Exchange Inflows & Outflows to the Yearly Average.

During a bull run (sustained uptrend), the Monthly Average trends above the Yearly Average, making higher highs.

Turning to our current market, we were starting to reverse the trend of lower lows, and the Monthly Average outperformed the Yearly Average with a brief poke above. However, we've now retreated down below the Yearly Average.

This indicates that investor activity picked up as Bitcoin reached its current Yearly High at $30K, but investors are now starting to slow down their spending activity.

More evidence of our potential downfall?

Bitcoin's Active Addresses just nose-dived. Historically, this precedes a price crash.

All is okay. Looking at Phillip Swift's 'Investor Tool,' we can see that we're still in a "generational buying zone" for Bitcoin.

Bitcoin's on-chain Reserve Risk also indicates that we're in a prime buying spot for the long run.

Conclusions?

On-Chain evidence supports that we've put in a significant cycle low following the collapse of FTX at approximately $15,000.

We've rallied powerfully off that demand zone and reached significant psychological resistance at $30,000.

Current evidence suggests technical and on-chain reasons for prices to lose $26K support, and short-term targets are $23.2.

Long-term investors should take advantage of the dip by securing their bull market bags on the upcoming dip.

Traders can look to short or buy puts on the current movement or hedge their spot holdings of Bitcoin.

This will likely harm the altcoin markets, but altcoins will continue to pump to squeeze every last dime out of the market before the plunge.