CrackingCryptocurrency

Crypto Market Update July 5, 2024

BITFINEX:BTCUSD   Bitcoin
Bitcoin Trend Analysis


Bitcoin's price declined -16% over the last four days. Following yesterday's open and close below the High-Volume Node Range, Bitcoin's price descended swiftly through the Low-Volume Node to reach a spot low of $53,219.

As I have taught for years, price moves quickly through Low-Volume Nodes, either through them or away from them. Contrast that with how long Bitcoin's price ranged through it's High-Volume Node for comparison.

Throughout last night's London Session, and today's early morning New York Session, buyers have stepped back in across the market, taking advantage of Bitcoin's discounted price and pushing our current price up 5% from its lows.

We have now closed two Daily Candles below the Daily 200 Simple Moving Average. On all previous occurrences, we have "rallied" back upwards to re-test the breakdown point. Comparing this with price's behavior when falling below the Realized Price Cost Basis of the Short-Term Holder Cohort (3-6 months), the dynamic is the same. Although we see that more accurately, price rallies to re-test that Cohort's Cost Basis.

That price is currently $60,500. That also aligns with the approximate breakdown level when Bitcoin's price began declining rapidly.

There is discrepancy in these historical examples with how quickly this rally occurred. In most occurrences, it happened very quickly, within a few days or week. In two of the examples, price consolidated sideways in a tight price range for approximately two weeks before making such a move. In those latter two examples, the rally was weaker then when price made a more V-Bottom shaped recovery.

However, one thing that is 100% accurate is that when price closes below the 200 Daily Simple Moving Average after reaching an All-Time High, it is a signal of the end of that current market cycle. During the last Market Cycle of 2021-2022, price did rally all the way to re-test the previous All-Time High and even made a slightly higher one. However, it failed to sustain a breakout and rejected, marking the Double Top end of that Bull Market.

Therefore, my analysis would suggest that this does indeed mark the end of the 2023-2024 Market Cycle, and unlike all previous historical Bull Markets we were not able to successfully sustain a strong breakout above previous All-Time Highs. Each previous Bull Market ended with a sustained stay in the 'Euphoria Phase' of the market - the most critical time when prices appreciate rapidly.

How quickly we bounce and how far, is dependent on current market factors.

As I have advocated our Academy Members and our reading public to be sitting in cash for over two months now, I feel quite justified witnessing the carnage wrought on the market with the fear and uncertainty of the last few days.

On a personal note, while I look back and see improvements on how I could have traded this (I didn't take large short positions that captured much of this bearish price movement past $60k) - my focus on Risk Management and Capital Preservation has allowed me to largely sit out this bloodbath.

Living to fight another day is the key concept of Money & Risk Management - if you lose it all, you can no longer trade. If you preserve your bankroll, there's always another trade.

Bitcoin Technical Analysis


Bitcoin's Bearish Trend is confirmed by the Gann Swing & DPMO Indicators.

We can see increasing sell-side Delta over the last four trading sessions, with Time Transformation marking the re-test of our Base Line with Hidden Bearish Divergence.

Price is not oversold on the Daily Timeframe, and we have Descending Trendline Support at approximately $50,000 - which also aligns with a previous consolidation range during Bitcoin's ascent and a High-Volume Node.

My current expectations are a re-tracement to approximately $60,500 - where we will evaluate the strength of a rejection if it occurs and consider targeting the $50,000 zone with short positions. Otherwise, if buyers are unable to create this rally immediately, we expect prices to fall to approximately $50,000 before a sideways consolidation and a weaker rally.

Bitcoin Liquidation Heatmap

https://cdn.prod.website-files.com/66672172c7278fe11e60f137/66880c91906f34df551ad0a8_July%205%2C%202024%20Bitcoin%20Liquidation%20Heatmap.png

Something very interesting about futures markets can be taken away from today's Liquidation Heatmap.

As we can see, Long Liquidations were continually shattered as Bitcoin's price continued to decline. However, if you pay attention to the Liquidation Profile below the current lows, you can see it was very thin. Not many liquidations were there.

This is a general rule of thumb I've noticed with trends. If price is trending down strongly, and buyers are still buying and setting limit orders below price, then price is much more likely to continue trending down, as there is liquidity there. Similar with liquidation levels, as long as buyers keep longing and setting liquidation stops in great density below price, price often continues lower to snatch that liquidity.

However, once buying interest starts to dissolve, and buyers get exhausted, and liquidations stop appearing so densely, that's often when price stops and reverses. That's exactly what we see here. As we can see, on today's upthrust we've cleared most short liquidations.

That would mark right now as a high-probability zone to consider short entries, because if price continues upwards the short squeeze might accelerate to $58 - $60k as expected in my retracement analysis.

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