In this post I will give a probability assessment of where Bitcoin will go in the near/medium future.
TL;DR - Despite fundamentals and a shifting rate environment, Bitcoin heavily favours more bullishness.
"The Fed is raising rates!"
"It's the end of the easy money environment!"
"And now there is war with Russia?! Oh we are definitely headed for a recession!"
You might read these kinds of comments all over the news at the moment and for good reason. They all impact the markets. Importantly though, as traders, we never react to this kind of rhetoric - instead, we plan.
For nearly an entire year we knew that stock prices were getting too high - easy liquidity was causing havoc behind the scenes and the party would eventually end. As time passed, the risk of going long in the traditional markets (which have not had a major pullback since the beginning of the pandemic) increased as the old adage of 'what comes up must go down' always rings true. Let's drill down and look at this on a more technical level in order to understand why Bitcoin is not subject to this, or at least not as exposed as Apple/Google/Amazon. The below chart is the S&P500.
The market has two major modes of operating (and a third but we will ignore that here) - Ranging or trending.
A trend is when price generally oscillates in a bullish direct or a bearish direction.
A range is when this does not happen. Instead, the price stabilises and hesitates, oscillating between two general price areas (e.g $100 and $125) before continuing the way it trended beforehand (bullish or bearish), or reversing that previous trend.
The ebb and flow of a stock over time is (technically speaking) price shifting between these two broad types of price action.
Applying this extremely simple rule to Bitcoin vs the S&P - we can clearly see that the S&P has heavily trended with no major pullbacks since the beginning of the pandemic. It is only now POTENTIALLY going through some form of pullback/range. Bitcoin on the other hand has clearly ranged since January 2021 while the S&P has definitely not.
There are a whole host of things we can gain from this but most importantly, it lowers the probability that Bitcoin will suffer the downside price action (or at least to a much lower extent) than the general stock market because it has digested the bullish trend experienced between March 2020 and January 2021 and is ready to move on, while the general stock market has not (and instead become extremely overvalued). While the impacts of tapering/inflation/war may influence Bitcoin, it has a much higher probability of these having only minor impacts on price action. Yeah, if you're looking at the 15 min/1h/4h charts you can draw parallels between the price action of the two, but on the bigger picture (daily and weekly) this is not the case.
So onto the technicals -
1: We have established that Bitcoin is in a range and more importantly, it is near the LOW of that range. This is good, this paints our picture of probability favouring future bullish price action and eventually breaking out of our range to continue our bullish trend experienced between march 2020 and january 2021 - we know that people are keen to buy Bitcoin down here and less likely to sell it on the cheap so without any major supports being broken (like the previous 30k bottom formed back in May/June/July 2021) it looks like Bitcoin is forming a higher low. Ontop of that it made a higher high in Nov/oct in comparison to the previous January 2021 high which was the last time it was near the higher end of the range. This combination of higher highs and higher lows tells us two important things: buyers are keen to step in and buy Bitcoin at more expensive prices & sellers are less keen to sell Bitcoin at cheap prices than in the past.
2: The point of control reflects an important level (both as a previous support and as the 50/50ish area between the range highs and low). By failing to hold significant candle closes below this level in the past few months, instead ping ponging across it, this adds to bullish probability that the above point (1) implies. Sellers are just not there to keep price down and buyers keep stepping in.
These two very simple points leads us to say: Despite the wider macro-economic uncertainty, Bitcoin has shown significant bullish action while ranging. This gives us a higher than not (50%+) probability that Bitcoin will break its all time high and head on up to the 75k & 100k areas for the completion of this bull cycle even if the stock market continues to sell off.
I'd like to see 43.5k area hold, as if this resistance turned support holds it would confirm the major higher low we just formed (increasing the probability of a break of the range to the upside) but it is not necessary - we could still come down to test anywhere above 37k before we get into danger. An invalidation of this scenario would require the 30k low made in June/July 2021 to be decisively broken.
If we confirm 43.5k as a support and the wider 37k as a range low then 50-55k should be our next stop. It is not necessary for this to happen though and a straightline to the range highs 58-67k would be very nice as it would say "ok buyers are really keen and so 100k Bitcoin has a probable possibility". A weak push to the range high with lots of drops and pauses would suggest probability might not favour this extended price target.
P.
TL;DR - Despite fundamentals and a shifting rate environment, Bitcoin heavily favours more bullishness.
"The Fed is raising rates!"
"It's the end of the easy money environment!"
"And now there is war with Russia?! Oh we are definitely headed for a recession!"
You might read these kinds of comments all over the news at the moment and for good reason. They all impact the markets. Importantly though, as traders, we never react to this kind of rhetoric - instead, we plan.
For nearly an entire year we knew that stock prices were getting too high - easy liquidity was causing havoc behind the scenes and the party would eventually end. As time passed, the risk of going long in the traditional markets (which have not had a major pullback since the beginning of the pandemic) increased as the old adage of 'what comes up must go down' always rings true. Let's drill down and look at this on a more technical level in order to understand why Bitcoin is not subject to this, or at least not as exposed as Apple/Google/Amazon. The below chart is the S&P500.
The market has two major modes of operating (and a third but we will ignore that here) - Ranging or trending.
A trend is when price generally oscillates in a bullish direct or a bearish direction.
A range is when this does not happen. Instead, the price stabilises and hesitates, oscillating between two general price areas (e.g $100 and $125) before continuing the way it trended beforehand (bullish or bearish), or reversing that previous trend.
The ebb and flow of a stock over time is (technically speaking) price shifting between these two broad types of price action.
Applying this extremely simple rule to Bitcoin vs the S&P - we can clearly see that the S&P has heavily trended with no major pullbacks since the beginning of the pandemic. It is only now POTENTIALLY going through some form of pullback/range. Bitcoin on the other hand has clearly ranged since January 2021 while the S&P has definitely not.
There are a whole host of things we can gain from this but most importantly, it lowers the probability that Bitcoin will suffer the downside price action (or at least to a much lower extent) than the general stock market because it has digested the bullish trend experienced between March 2020 and January 2021 and is ready to move on, while the general stock market has not (and instead become extremely overvalued). While the impacts of tapering/inflation/war may influence Bitcoin, it has a much higher probability of these having only minor impacts on price action. Yeah, if you're looking at the 15 min/1h/4h charts you can draw parallels between the price action of the two, but on the bigger picture (daily and weekly) this is not the case.
So onto the technicals -
1: We have established that Bitcoin is in a range and more importantly, it is near the LOW of that range. This is good, this paints our picture of probability favouring future bullish price action and eventually breaking out of our range to continue our bullish trend experienced between march 2020 and january 2021 - we know that people are keen to buy Bitcoin down here and less likely to sell it on the cheap so without any major supports being broken (like the previous 30k bottom formed back in May/June/July 2021) it looks like Bitcoin is forming a higher low. Ontop of that it made a higher high in Nov/oct in comparison to the previous January 2021 high which was the last time it was near the higher end of the range. This combination of higher highs and higher lows tells us two important things: buyers are keen to step in and buy Bitcoin at more expensive prices & sellers are less keen to sell Bitcoin at cheap prices than in the past.
2: The point of control reflects an important level (both as a previous support and as the 50/50ish area between the range highs and low). By failing to hold significant candle closes below this level in the past few months, instead ping ponging across it, this adds to bullish probability that the above point (1) implies. Sellers are just not there to keep price down and buyers keep stepping in.
These two very simple points leads us to say: Despite the wider macro-economic uncertainty, Bitcoin has shown significant bullish action while ranging. This gives us a higher than not (50%+) probability that Bitcoin will break its all time high and head on up to the 75k & 100k areas for the completion of this bull cycle even if the stock market continues to sell off.
I'd like to see 43.5k area hold, as if this resistance turned support holds it would confirm the major higher low we just formed (increasing the probability of a break of the range to the upside) but it is not necessary - we could still come down to test anywhere above 37k before we get into danger. An invalidation of this scenario would require the 30k low made in June/July 2021 to be decisively broken.
If we confirm 43.5k as a support and the wider 37k as a range low then 50-55k should be our next stop. It is not necessary for this to happen though and a straightline to the range highs 58-67k would be very nice as it would say "ok buyers are really keen and so 100k Bitcoin has a probable possibility". A weak push to the range high with lots of drops and pauses would suggest probability might not favour this extended price target.
P.
There is hope at the end of the tunnel though! Considering how harsh the stock market pullback has been AND how ultra-strong the dollar has been I will emphasis this again - NOTHING has changed. Even with these major external catalysts, and an absolute onslaught on Bitcoin, it remains above the 37k support and the major support of 30k. A break of 37k is a warning sign, while a break of 30k heavily undermines the bullish extraction of this range and then we can start talking about a bear market.
What does that mean if the wider market slows down or the dollar hesitates or weakens?
And so - probability still heavily favours bullish price action. What we are seeing here is the beginnings of the K shape recovery (something we are witnessing in the wider market - like who has heard anything about Pelaton or ZOOM ) - the run from 3k-60k for Bitcoin was accompanied by insanely dumb/over valued random coins (lol dodge coin like wtf?) gaining billions in an easy money post-covid environment (just like the wider market). With money getting tigher, rates rising and marco-economic factors worsening, the speculative risk-on environment has transitioned to a value risk-off environment. In this environment good project (ETH/BTC) that have inbuilt value will regain due to their strong fundamentals while the crappy randomass unproven projects with no value will continue to falls.
That's survival of the fittest baby! And that's why probability still heavily favours bullishness from our big boy papa bitcoin.