Cryspo
Short

Is bitcoin heading towards another cliff??

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
Good day Traders

Bitcoin had a strong short squeeze and break out from that falling wedge , albeit earlier than I expected. On reflection, this current consolidation range ($3200 - $4200), seems to be playing out in a similar pattern to the $6000 - $7400 consolidation range, which we had right before our main drop from our $6k support. The short squeeze we had yesterday is very similar to the squeeze we had on 15 October 2018. There seems to be a similar triangle playing out, also with gradual uptrend support. Our DMA50 is acting as strong resistance yet again, and our DMA100 is starting to converge with our DMA50, which should provide additional resistance when they bundle up closer to the triangle apex, as it was in the prior consolidation range before the drop from $6k.

This can be illustrated by the pitchfork starting from our ATH and connecting the 2 main pivots before the main drop at the end of 2018. By adding an additional parallel channel , you can see that we're slowly approaching the exact same outer channel resistance as we did in November 2018, before the crash. We seem to be heading for the same type of triangle and DMA50/DMA100 resistance, and volume has been following a similar valley-type build up of momentum leading up to the surge yesterday.

If the same pattern plays out, we should drop back to our triangle support after being rejected by our DMA50/DMA100 and we should breakdown from triangle support as we approach the apex around 20 Feb 2019. This time, however, we still have our weekly SMA200 support to contend with, and this I believe to be the difference between us bottoming now or lower, although I suspect that the WMA200 might not hold this time, just as the iron clad $6k support wasn't able to hold as everyone had expected.

Interestingly, in 2018 the wave down from the previous swing high to our triangle support (24 July 2018), had close to a 68.1 fib retracement afterwards, which gave us a 127.2 fib extension target when we dropped to $5188, before briefly consolidating, and continuing the drop from there to the 161.8 fib support of that wave down, before dropping further and finding our annual low right at the median line of our pitchfork .

The prior main wave from our $9948 swing high in May 2018 to our 24 June swing low (before the start of the triangle uptrend), had a 61.8 fib retracement afterwards, and the 132.8 - 168.1 fib extension of that wave basically set the consolidation range which we are currently in ($3200 - $4200). The 168.1 fib extension of this move coincided with our annual low for 2018.

If you apply the same Fibonacci levels to our current consolidation range, you'll see that after dropping from our triangle support, we should first drop to the next pitchfork channel support, and a 127.2 fib extension target of $2780, where we will probably have brief consolidation, like we did around $5500, before dropping to the 161.8 fib support of that move ($2334), before again finding our pitchfork median support, and finally reaching our next consolidation range, between $1560 - $2160 (138.2 - 168.1 fib extension of the previous wave down), and a new annual low somewhere around $2k.

Looking at our ADX/DI indicator, you can see we had similar trend strength and direction that we had around $6k, and we are fast approaching the same RSI resistance as we had at the $6k drop so for anyone trying to find out if our bottom is already in, this might be your answer but then again, who knows.

Good luck and happy trading!

The "already bottomed" argument:



The more pain bearish bottom argument:





@Cryspo - Thank you for your analysis. I appreciate your perspective. When reviewing Fib levels throughout BTC's history, it is quite apparent that Fibs play an important role, particularly with Weekly TF's. Why do you think this is the case? Is there a certain "type" of investor that is trading BTC? I read a study that suggested the "Average" Crypto Trader was a 35 - 54 year old Japanese investor accustomed to trading Forex. Could this explain the relationship to Fibs? Would very much like to hear your thoughts!
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Cryspo SocialCryptopreneur
@SocialCryptopreneur, I think these fib levels are quite reliable when determining strong areas of S/R simply because they are used by a vast enough number of traders, which in turn influences the market. Decent possibility regarding the average Japanese investor hypotheses, thanks for sharing. It do seem like they're magic ratios, especially when they're used to identify harmonic price patterns etc.
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GBPUSD D1 Running flat for more downside. Checkout the idea detail's and update's for the complete picture!
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I think the key difference though is the wick on that last one indicating the selling pressure. Here it looks nice and stable. Should get more info in a day or two as to whether it weakens and drops or pops up again.
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Cryspo GeeWillikers
@GeeWillikers, the wick was long enough to reach triangle resistance, similarly to then. The previous short squeeze on 15 October might have also been coupled with an overeaction to the tether FUD which was going on back then. Everyone piled into bitcoin and other stable coins when bitfinex lost their main banking relationship at the time, creating massive price divergence between the stable coins and exchanges. You'll see that wick is a lot longer on the USDT exchanges.
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