BTC/USD: A Distributive Phase for a Pullback 1D (Aug. 09)

X Force Global Analysis:


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In this post, we analyze Bitcoin's daily chart from the perspective of market cycles based on Wyckoff's Accumulation and Distribution theories.

Analysis

- The Wyckoff Price Cycle bases its foundations on supply and demand
- After a downtrend, prices consolidate within a phase of accumulation
- Accumulation takes place when Bitcoin is at an oversold state
- Prices break out after having consolidated, completing the mark up phase
- The markup phase indicates that the demand is greater than the supply
- After a second phase of accumulation, prices break out once again to test new local highs
- As prices consolidate sideways, it marks the beginning of a distribution phase
- Distributions take place when Bitcoin is overbought
- Eventually, prices break down after a sideways range, confirming a markdown phase

- The current daily chart demonstrates Bitcoin having consolidated from 3.5k to 7.5k before breaking out
- The second phase of consolidation took place between 8.5k and 9.4k, with a markup leading to 12k
- The distribution phase is currently taking place between 10.9k and 12.1k
- Given that a markdown plays out, we could anticipate a price movement retesting the 2.5 year old long term descending trend line resistance, which has now become a support
- The lowest CME gap remains at 9.4k, converging with the descending trend line

Market Sentiment:

Long short ratios are at 71 to 29, with significantly more long positions than short positions in the market.

What We Believe

Based on Wyckoff's Market Cycle Theory, we believe that a correction in the form of a pullback is highly probable, given that prices are currently consolidating within a distribution phase.

Let us know what you think in the comment section below


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Comment:

Bitcoin is still consolidating at a distributive phase, as it has attempted to break out and break down one time each.

Both bulls and bears are showing extreme strength at these areas.

Bulls have managed to secure the 0.5 Fib support, and close above the 0.618 Fib support. They are looking to potentially re-test the local high, or even create a higher high.

At the same time, however, technicals on the daily demonstrate signs of Bitcoin being overextended, with minimal volume for a bullish move.

Comment:

On the 4 hour, we can see the bullish momentum topping off, forming a triple top formation. While this structure may be confusing as to whether it's a bullish ascending triangle as a continuation pattern, or a triple top formation at a distribution phase, given the lack of bullish momentum and strong resistance, this structure is more likely a triple top formation.

Counting Elliott Waves, we can see an Elliott Triangle Wave (ABCDE) structure leading to test 12k, only to get rejected, and break down from the rising wedge formation.

The longer Bitcoin stalls in these regions, unable to break through 12k, the higher the probability of this phase being one of distribution.