The 3-Day 200 MA - Bitcoin Could Fall Straight To $20k
In my most recent short-term outlook for Bitcoin, I suggested that we could see a rally towards the top of the uptrend channel and the $46-50k liquidity zone. Form there, I thought price could simply turn back down towards $40k and below, eventually breaking down from the flag. There was also the possibility of a brief move towards $51-52k but too many greedy longs were eyeing that level (I know, because I frequent trading groups and forums). Here is the original analysis from March 15th:
The daily is getting very oversold, and short interest is piling in, as evidenced by negative funding. There could easily be a relief bounce from current levels, but I do not think it is very likely to break back above the $42-43k range. I am mostly out of the market now, and I await a time in the future (perhaps a year or two from now) to decide where to redeploy capital. I believe the next big thing will not be tech related, but more concerning nature and the environment. I'm big on mushrooms, for instance. More on that in another post.
As shown in the primary chart for this analysis, every time Bitcoin has broken below the 200 day Moving Average (teal) on the 3 day timeframe, price has dropped by roughly 40-50%. In 2014, it dropped closer to 60%. Right now, it's barely hanging onto the support. If it cannot bounce convincingly from these levels, historical precedent says we could see a substantial liquidity event. If Bitcoin heads back to $20k, the long term value proposition would truly be called into question, and I don't think the asset will do much for a very long time, if at all.
There are some further concerning technical developments. The 3 day MACD is starting to weaken, and is close to flipping red. Even the weekly could barely stay green, while remaining in negative territory below the zero line. Stoch is also curving back down. With the rejection of the 50 week MA, things are really starting to look like Summer, 2018, but honestly more aggressively bearish in my opinion. Current weekly:
2018 weekly:
On the bullish side, Bitcoin needs to reclaim that 50 week MA pretty quickly and hold above for a considerable amount of time. But it's already starting to curve down. Also, in looking at my Litecoin analysis from March 22nd, the dead cat bounce has played out perfectly so far:
But, but, but whales are accumulating!! On chain this, on chain that! Bitcoin only has value because people believe it does. There is no profit generation or any kind of necessary service to humankind. Belief in Bitcoin appears to be waning, as shown by its inability to perform alongside metals and commodities. It is performing like a leveraged stock index or a speculative investment. The environment Bitcoin was made for is here, yet it's hardly being used. The jig is up. For a while, I was thinking maybe a different narrative could evolve around it, but that was not the case during this cycle. And I think this was the most important cycle. Sure, some billionaires are buying into the idea But that's only because number go up. When billionaires make an investment, they hope others will need it, or buy it from them at a higher price. Not sure that'll happen with this particular asset.
Historically, markets that have gone up this much in such a short timespan (thinking of traditional markets as well) always come back to Earth in spectacular fashion. This time, I don't think the FED has any choice but to let it happen. My hope is that if this does indeed occur, it results in some serious policy change that brings SUBSTANTIVE investments into our future - education, clean energy, healthcare, dealing with climate change, social safety nets....infrastructure....and I could go on and on. We seriously need it. And for this, they will NEED to tax the wealthy. As things have gotten more socioeconomically divided, our hope at making change ourselves diminishes as we cannot find solidarity with each other. I think we need an even bigger shock to our system. Clearly COVID wasn't enough.
As always, this is meant for speculation and entertainment only! This represents my opinion, and should not be taken as financial advice.
-Victor Cobra
The daily is getting very oversold, and short interest is piling in, as evidenced by negative funding. There could easily be a relief bounce from current levels, but I do not think it is very likely to break back above the $42-43k range. I am mostly out of the market now, and I await a time in the future (perhaps a year or two from now) to decide where to redeploy capital. I believe the next big thing will not be tech related, but more concerning nature and the environment. I'm big on mushrooms, for instance. More on that in another post.
As shown in the primary chart for this analysis, every time Bitcoin has broken below the 200 day Moving Average (teal) on the 3 day timeframe, price has dropped by roughly 40-50%. In 2014, it dropped closer to 60%. Right now, it's barely hanging onto the support. If it cannot bounce convincingly from these levels, historical precedent says we could see a substantial liquidity event. If Bitcoin heads back to $20k, the long term value proposition would truly be called into question, and I don't think the asset will do much for a very long time, if at all.
There are some further concerning technical developments. The 3 day MACD is starting to weaken, and is close to flipping red. Even the weekly could barely stay green, while remaining in negative territory below the zero line. Stoch is also curving back down. With the rejection of the 50 week MA, things are really starting to look like Summer, 2018, but honestly more aggressively bearish in my opinion. Current weekly:
2018 weekly:
On the bullish side, Bitcoin needs to reclaim that 50 week MA pretty quickly and hold above for a considerable amount of time. But it's already starting to curve down. Also, in looking at my Litecoin analysis from March 22nd, the dead cat bounce has played out perfectly so far:
But, but, but whales are accumulating!! On chain this, on chain that! Bitcoin only has value because people believe it does. There is no profit generation or any kind of necessary service to humankind. Belief in Bitcoin appears to be waning, as shown by its inability to perform alongside metals and commodities. It is performing like a leveraged stock index or a speculative investment. The environment Bitcoin was made for is here, yet it's hardly being used. The jig is up. For a while, I was thinking maybe a different narrative could evolve around it, but that was not the case during this cycle. And I think this was the most important cycle. Sure, some billionaires are buying into the idea But that's only because number go up. When billionaires make an investment, they hope others will need it, or buy it from them at a higher price. Not sure that'll happen with this particular asset.
Historically, markets that have gone up this much in such a short timespan (thinking of traditional markets as well) always come back to Earth in spectacular fashion. This time, I don't think the FED has any choice but to let it happen. My hope is that if this does indeed occur, it results in some serious policy change that brings SUBSTANTIVE investments into our future - education, clean energy, healthcare, dealing with climate change, social safety nets....infrastructure....and I could go on and on. We seriously need it. And for this, they will NEED to tax the wealthy. As things have gotten more socioeconomically divided, our hope at making change ourselves diminishes as we cannot find solidarity with each other. I think we need an even bigger shock to our system. Clearly COVID wasn't enough.
As always, this is meant for speculation and entertainment only! This represents my opinion, and should not be taken as financial advice.
-Victor Cobra
Comment:
Here's an interesting comparison, in terms of MA's
Comment:
And here's the bounce, due to oversold conditions and negative funding. Unless Bitcoin can gain some real buyer volume and break above this $41-43k zone, price can easily head back to the lows. If Bitcoin is to truly break down from this zone, it could take a little bit of time.
Comment:
Bitcoin has also so far bounced from the 200 MA on the 3 day chart.
Comment:
Yikes, already retracing all of yesterday's gains and confirming the 100 day and 50 day Moving Averages as resistance.
Comment:
Quick update: Today's high is roughly the highest I'd expect Bitcoin to go without invalidating this bearish idea. If Bitcoin can push through that $42-43k resistance zone, it can try to make a new local high, without making a new lower low within the structure. However, the buyer volume off the lows keep declining, and today's sell volume is already eclipsing the buying from Monday. Now let's see if the market finally gives up, or if it continues to range.
