On May 27th, 2022, I wrote about why I thought it was possible Bitcoin would never outperform the stock market again on bigger timeframes. Here is the original post:
Since my last analysis, Bitcoin has so far failed to reclaim the local uptrend and develop any support above the previous all-time high, around $19800. You can see the current daily chart zoomed in here, and the dwindling buyer volume.
Because of this failure to reclaim 19800 and the local uptrend, the leading cryptocurrency will need to have a much stronger move to the upside to begin developing a bullish structure. As it stands, Bitcoin remains trapped below the 50 day MA (red) and the 9 EMA on the weekly. Although buyers have shown strong support on any dips below $19k, overall local volume continues to drop. On the righthand chart, you can see that Bitcoin has continued to struggle performance-wise against traditional markets, despite remaining above this year's low at $17600 while many stocks made new lows. Although bullish at first glance, Bitcoin remains in a troublesome position against traditional markets. You can see why, referring to my analysis from May 27th.
A drop to $4-5k seems improbable, though I am basing this possibility on at least some logic. Let's say traditional markets still have some more downside even after the current bounce reaches its peak (which is reasonable, considering macroeconomic factors). And let's look at the BTC/SPX chart on the right, where Bitcoin has broken its long term uptrend and failed to sustain new highs. This could imply Bitcoin is on the verge of a long term reversal to the downside, meaning that it may never again achieve its all-time high. Bitcoin is looking bearish for the first time ever on the monthly timeframe, with no MA support until around $13k, and important MA's now becoming resistance.
If we do simple math, and speculate that SPX could even head only 20-25% lower to near 3000, and if Bitcoin drops to the next major support on the SPX ratio (near 1.5), that puts Bitcoin price near $4500.
To me, this looks like an asset that has ended its long term growth. Bitcoiners will probably continue to deny this possibility, and market participants would probably get particularly bullish if we see prices bounce towards the $30k region (perfectly possible). But I don't really expect any major rally to sustain, unless Bitcoin can get comfortably into the $40/50k zone without much resistance. Even if that happens, I will just be disappointed, because I doubt that rally would be helpful for too many people, except those fortunate enough to have the means to stomach severe losses and to keep piling in capital. Each day, the number of people with such liquidity drops and inflation weighs on the economy. So then, what benefit would higher Bitcoin prices really have for society? As we've seen, hype lures in new investors, who more often than not lose money because by the time they've heard of price "mooning" it's already too late.
It also seems those still invested in the crypto market are becoming more and more confident that this is the bottom, since we've been here for so long. Meanwhile, open interest continues to remain high, and it skyrockets on any small move up. This tells me a lot of leveraged longs have piled in at these levels (most likely from retail), as glassnode shows us that larger whales are actually slowly unloading at these levels. Sometimes people take on even more risk to prove to themselves something that they know deep down is a farce. In the face of denial, a common behavior is to do things to prove your position.
It's hard to tell what the prevailing sentiment is. The masses seem to be bearish, while those who remain in Bitcoin and other cryptocurrencies seem to be developing some optimism and encouraging buyers. "Now is a great time to buy, and even if it drops another 50% I'll be backing up the truck!" We heard this at $40k. Again, I think crypto reached critical mass this cycle, especially considering the super bowl commercials and Dogecoin mania (both of which signaled the market tops above $60k). If there is another cycle, it will need to be built on utility and not just hype/speculation. My issue is that I'm not sure crypto CAN transcend hype and speculation. So this leads me to speculate that Bitcoin will not mage a significant new all time high in the future.
On the bullish side, you can refer to my last post, where I talk about the resumption of an uptrend. It's clear that Bitcoin needs to establish itself back above $20k and make a considerable jump in price.
There is also an optimistic view of the economy, which could play out over the coming months: Wages begin increasing as interest rates also increase and remain at healthy levels for a while to discourage unhealthy borrowing/bubbly market behavior. The middle-class is rebuilt, as social welfare services become more robust and companies with true value prosper, which bring innovation and health to our physical and social infrastructures. Essentially, "trickle down economics," but forced by adverse conditions created by the trickle down policies themselves, only decades later.
In this optimistic scenario, it is also difficult to see Bitcoin achieving a new high, considering some trust in the government would be rebuilt, and confidence in the federal reserve's economic policy would be restored. Bitcoin and cryptocurrencies would probably languish and be mostly forgotten, until the next era of greed and irresponsible borrowing initiates a new bubble for god knows what. This is the "soft landing." How likely is it? Maybe things just work out.
And of course, the opposite could happen. That's what's so interesting about all of this. There are many possible outcomes, and as someone who looks for investments, it's best to be creative and adaptive.
This is meant for speculation only and not as financial advice.
-Victor Cobra
Since my last analysis, Bitcoin has so far failed to reclaim the local uptrend and develop any support above the previous all-time high, around $19800. You can see the current daily chart zoomed in here, and the dwindling buyer volume.
Because of this failure to reclaim 19800 and the local uptrend, the leading cryptocurrency will need to have a much stronger move to the upside to begin developing a bullish structure. As it stands, Bitcoin remains trapped below the 50 day MA (red) and the 9 EMA on the weekly. Although buyers have shown strong support on any dips below $19k, overall local volume continues to drop. On the righthand chart, you can see that Bitcoin has continued to struggle performance-wise against traditional markets, despite remaining above this year's low at $17600 while many stocks made new lows. Although bullish at first glance, Bitcoin remains in a troublesome position against traditional markets. You can see why, referring to my analysis from May 27th.
A drop to $4-5k seems improbable, though I am basing this possibility on at least some logic. Let's say traditional markets still have some more downside even after the current bounce reaches its peak (which is reasonable, considering macroeconomic factors). And let's look at the BTC/SPX chart on the right, where Bitcoin has broken its long term uptrend and failed to sustain new highs. This could imply Bitcoin is on the verge of a long term reversal to the downside, meaning that it may never again achieve its all-time high. Bitcoin is looking bearish for the first time ever on the monthly timeframe, with no MA support until around $13k, and important MA's now becoming resistance.
If we do simple math, and speculate that SPX could even head only 20-25% lower to near 3000, and if Bitcoin drops to the next major support on the SPX ratio (near 1.5), that puts Bitcoin price near $4500.
To me, this looks like an asset that has ended its long term growth. Bitcoiners will probably continue to deny this possibility, and market participants would probably get particularly bullish if we see prices bounce towards the $30k region (perfectly possible). But I don't really expect any major rally to sustain, unless Bitcoin can get comfortably into the $40/50k zone without much resistance. Even if that happens, I will just be disappointed, because I doubt that rally would be helpful for too many people, except those fortunate enough to have the means to stomach severe losses and to keep piling in capital. Each day, the number of people with such liquidity drops and inflation weighs on the economy. So then, what benefit would higher Bitcoin prices really have for society? As we've seen, hype lures in new investors, who more often than not lose money because by the time they've heard of price "mooning" it's already too late.
It also seems those still invested in the crypto market are becoming more and more confident that this is the bottom, since we've been here for so long. Meanwhile, open interest continues to remain high, and it skyrockets on any small move up. This tells me a lot of leveraged longs have piled in at these levels (most likely from retail), as glassnode shows us that larger whales are actually slowly unloading at these levels. Sometimes people take on even more risk to prove to themselves something that they know deep down is a farce. In the face of denial, a common behavior is to do things to prove your position.
It's hard to tell what the prevailing sentiment is. The masses seem to be bearish, while those who remain in Bitcoin and other cryptocurrencies seem to be developing some optimism and encouraging buyers. "Now is a great time to buy, and even if it drops another 50% I'll be backing up the truck!" We heard this at $40k. Again, I think crypto reached critical mass this cycle, especially considering the super bowl commercials and Dogecoin mania (both of which signaled the market tops above $60k). If there is another cycle, it will need to be built on utility and not just hype/speculation. My issue is that I'm not sure crypto CAN transcend hype and speculation. So this leads me to speculate that Bitcoin will not mage a significant new all time high in the future.
On the bullish side, you can refer to my last post, where I talk about the resumption of an uptrend. It's clear that Bitcoin needs to establish itself back above $20k and make a considerable jump in price.
There is also an optimistic view of the economy, which could play out over the coming months: Wages begin increasing as interest rates also increase and remain at healthy levels for a while to discourage unhealthy borrowing/bubbly market behavior. The middle-class is rebuilt, as social welfare services become more robust and companies with true value prosper, which bring innovation and health to our physical and social infrastructures. Essentially, "trickle down economics," but forced by adverse conditions created by the trickle down policies themselves, only decades later.
In this optimistic scenario, it is also difficult to see Bitcoin achieving a new high, considering some trust in the government would be rebuilt, and confidence in the federal reserve's economic policy would be restored. Bitcoin and cryptocurrencies would probably languish and be mostly forgotten, until the next era of greed and irresponsible borrowing initiates a new bubble for god knows what. This is the "soft landing." How likely is it? Maybe things just work out.
And of course, the opposite could happen. That's what's so interesting about all of this. There are many possible outcomes, and as someone who looks for investments, it's best to be creative and adaptive.
This is meant for speculation only and not as financial advice.
-Victor Cobra
Comment:
An update to the current structure: Bitcoin still ideally needs to hold above that uptrend and solidly begin trading above $20.8k. The 100 day MA (yellow) has so far served as resistance. Flipping that into support could provide grounds for a rally towards $30k+, but we really need to see buyers have more conviction. It so far is probably presently surprising to Bitcoin bulls that the asset has held up despite some meltdowns in big tech. Let's see what happens. A break back below $19.8k would be a sign of continued weakness.
Comment:
Comment:
If Bitcoin can put pressure on the resistance and break above, we could see a pretty explosive move over the weekend towards $25k. Depending on whether or not this happens, it should give us an idea as to where stocks may also be headed the following week.
Comment:
Of course just as Bitcoin enters a position that could produce bullish momentum, the dogshit fundamentals of this market show their ugly heads again. Let’s see if this current move produces a new low.
Comment:
New low achieved. Now will we get a weekly death cross?
