So bitcoin has broken down out of a three month descending triangle structure with a huge violent move that has sparked the usual panic and cries of manipulation from the masses of newbies and amateur traders. Before looking any deeper into the charts it is worth noting that the current trading environment is very illiquid with low volume spot trading, thin order books and the market generally being led by Bitmex. The large wicks and "barts" that have been prevalent especially in the last month of low liquidity which people love to call manipulation are usually caused by liquidation cascades on Bitmex. Degenerate traders (gamblers?) using high leverage in a flat illiquid market get chopped up and it doesn't take much to trigger their stops and liquidation points causing a sharp squeeze in either direction.
Now looking at the descending triangle the odds were always in favour of breaking down, with each test of support the likelihood of a break increased and also the expected volatility of the move. As more buyers and longs entered at support that is also more stop losses just below the base of the triangle to fuel a break down. In this environment once the support was lost a huge move was absolutely to be expected, Bitmex long liquidations alone were over $650m yesterday, that's a lot of selling. Now on to the charts.
Support levels drawn on the daily do not look particularly strong due to the parabolic rise from April so we must look for confluence with other indicators as I would not be confident in any of these holding on their own. The $9100 level already acted as support twice before the break down and should flip to resistance from here. The next level around $8300 is currently holding as support in confluence with the 200 day moving average and the CME gap close meme. Below this we have a stronger support around $7600 and then its open air a long way down.
The 50 and 100 day moving averages have crossed and turned down, not a good sign. There is a lot of talk about how bitcoin has never broken the 200 in a bull market which is based on a very short history of two previous cycles and there will be plenty of doom predictions if it fails to hold. So far the bounce really has not shown enough strength to suggest this is already the bottom.
Looking at fib levels from this run up the significant .618 level sits around $7200 and should act as support.
On the weekly chart we are still above all major moving averages. Fib levels from the all time high to the December bottom have been very significant, with the .618 acting as strong resistance and the .382 in line with the descending triangle support. The next support at .236 lies at $7000.
So what is most likely to happen from here? In my opinion we still have a bit further to fall although this is still a bull market. Watch for an initial push back into the $9100-$9400 support turned resistance zone which could be a good shorting opportunity, unless this breaks with conviction and takes us back into the triangle and out the other side, in which case we have a V bottom and new highs await. Most likely is another capitulation down into the low $7000s, this is where the strongest horizontal support lies and could be a great opportunity for a long term spot buy or futures at a discount. If bitcoin falls below $7k for any prolonged time then that would seriously call into question that this is now a bear market and we go much lower. It would be a >50% fall from the top, break all significant support and fib levels and most major moving averages.
Now looking at the descending triangle the odds were always in favour of breaking down, with each test of support the likelihood of a break increased and also the expected volatility of the move. As more buyers and longs entered at support that is also more stop losses just below the base of the triangle to fuel a break down. In this environment once the support was lost a huge move was absolutely to be expected, Bitmex long liquidations alone were over $650m yesterday, that's a lot of selling. Now on to the charts.
Support levels drawn on the daily do not look particularly strong due to the parabolic rise from April so we must look for confluence with other indicators as I would not be confident in any of these holding on their own. The $9100 level already acted as support twice before the break down and should flip to resistance from here. The next level around $8300 is currently holding as support in confluence with the 200 day moving average and the CME gap close meme. Below this we have a stronger support around $7600 and then its open air a long way down.
The 50 and 100 day moving averages have crossed and turned down, not a good sign. There is a lot of talk about how bitcoin has never broken the 200 in a bull market which is based on a very short history of two previous cycles and there will be plenty of doom predictions if it fails to hold. So far the bounce really has not shown enough strength to suggest this is already the bottom.
Looking at fib levels from this run up the significant .618 level sits around $7200 and should act as support.
On the weekly chart we are still above all major moving averages. Fib levels from the all time high to the December bottom have been very significant, with the .618 acting as strong resistance and the .382 in line with the descending triangle support. The next support at .236 lies at $7000.
So what is most likely to happen from here? In my opinion we still have a bit further to fall although this is still a bull market. Watch for an initial push back into the $9100-$9400 support turned resistance zone which could be a good shorting opportunity, unless this breaks with conviction and takes us back into the triangle and out the other side, in which case we have a V bottom and new highs await. Most likely is another capitulation down into the low $7000s, this is where the strongest horizontal support lies and could be a great opportunity for a long term spot buy or futures at a discount. If bitcoin falls below $7k for any prolonged time then that would seriously call into question that this is now a bear market and we go much lower. It would be a >50% fall from the top, break all significant support and fib levels and most major moving averages.