Background: If you read my earlier TA you know we entered May focused on two possible outcomes for the month- one is a correction and the second was consolidating between 50-60k. Based on the recent price action and breakout from the triangle on 07 May that was validated by restesting that former resistance as support- we are adding a third possible scenario.
Despite the weak price action and my three scenarios below, I am of the opinion that we are seeing industry continue to accumulate Bitcoin in this range. Grayscale made over $1 billion USD investment in crypto in the past ~10 days, and in addition to the healthy outflow of Bitcoins we also observed 2 massive Coinbase OTC order over 10,000 Bitcoins each at prices over $55,000 USD.
Note- If you spent any time reading my TA you know I am not keen on absolutes. Patterns rarely land absolutely where you predict, but you can often predict a range and that is usually enough time to validate a direction and enter or exit a trade. Remember to get a second candle validation at whatever timeframe you trade in before executing the trade.
Scenarios for May:
Despite the weak price action and my three scenarios below, I am of the opinion that we are seeing industry continue to accumulate Bitcoin in this range. Grayscale made over $1 billion USD investment in crypto in the past ~10 days, and in addition to the healthy outflow of Bitcoins we also observed 2 massive Coinbase OTC order over 10,000 Bitcoins each at prices over $55,000 USD.
Note- If you spent any time reading my TA you know I am not keen on absolutes. Patterns rarely land absolutely where you predict, but you can often predict a range and that is usually enough time to validate a direction and enter or exit a trade. Remember to get a second candle validation at whatever timeframe you trade in before executing the trade.
Scenarios for May:
- 1. Correction to retest the 20/21W SMA/EMA. You've seen me reference this quite a bit and we haven't revisisted that MA support since Q4 2020. In my opinion its important to validate support for the longer bull cycle against those MAs and failure to do so is tipping the scales towards a possible bear cycle.
From this point it would take around a 10-12% correction to meet those MA, but by the 4th week of May or early June we may only have to dip to around ~55k to retest them, if we continue consolidation in this range.
This means that correcting sooner we will see a stronger movement, as high as 12% drop, but later in the month the correction would be almost negligible. As stated above, if we do correct to the MAs and it fails to support Bitcoin, we will look for a stronger correction and the possiblity of a bear cycle grows.
- 2. Consolidation through May. We've seen this before in the past couple months- Bitcoin paints a pattern, breaks out of the pattern weakly and continues to range slowly. This is indicative of an accumulation phase as industry/whales occasionally nudge the price in a direction, and this weak volatility sows disinterest from most retail traders further reducing volatility.
If we believe those MA represent the bottom support for the bull cycle and ~60k represents the resistance, the remainder of May will see Bitcoin consolidate within (up to) 12-18% price range, decreasing over time as the 20/21W MAs catch up. This scenario means slower and less volatile price action for Bitcoin, floundering Bitcoin dominance, and continued opportunity for altcoins to regain ground against Bitcoin (Ethereum anyone?).
- 3. Breakout over 60k. This feels like the least likely scenario in my opinion, but Bitcoin is possibly painting a bullish pattern here -possibly- an ascending triangle against the ~60k resistance since it broke over the triangle it was in for the first week of May. We need to observe Bitcoin another day to confirm that pattern but if it holds, this presents an opportunity to possibly breakout bullish and retest our ATHs.
However another stronger possibility in this analyst's opinion is a fakeout/bull trap where we break bullish over 60k and see a downtrend soon after and correction towards those MA; or a downtrend and fall into additional consolidation, which would mean scenario 3 turns into scenario 1 or 2.
Whats Next: The key to success in May is to look for validation of either of these scenarios. In my opinion some form of scenario 2 is most likely. I think the MM and whales are happy to continue accumulation here, and there are no clear indications of distribution preceding a sell-off before a bear cycle- its quite the opposite and we see some very large crypto investments by industry, with more to follow.
Remember that for much of industry, 2021 is ground zero for them to enter the market and FOMO is as applicable to them as it is to retail- and while its hard to predict how the industry investment and participation will change the crypto market in the long run, its clear that they are interested and this should bode well for retail investors in the short term.
Of course nothing is guaranteed in this space so trade safely, set stoploss and good luck. Also most important- this isn't financial advice, always do your own research to validate the opinions of analysts you see on TV.
Comment:
Props to Reverb for suggesting that bottom trendline as support. Looks like Bitcoin got tripped up on one of it's supports along the way.
Update: It looks like we saw a bit of scenario 1 and 2 at play. As I suspected it wasn't going to break bullish at this time. I don't believe the corrections are over for May.
We are seeing one ~10% drop a week- then recovery - then another 10% drop-... but I think the next one will probably be sooner, given their fondness for 2nd week of the month corrections- and that would add up to around a 20% correction for May and let us retest the 20/21W MA support.
That basically means if you are still holding bags, prepare for a possible drop of another ~10% this week. Set stoplosses where you feel comfortable based on average volatility. I think it will be a day or so, but it could come much sooner.
That said, this is invalidated if we suddenly see strong bullish volume on Bitcoin and close over the 57.6k resistance.
Update: It looks like we saw a bit of scenario 1 and 2 at play. As I suspected it wasn't going to break bullish at this time. I don't believe the corrections are over for May.
We are seeing one ~10% drop a week- then recovery - then another 10% drop-... but I think the next one will probably be sooner, given their fondness for 2nd week of the month corrections- and that would add up to around a 20% correction for May and let us retest the 20/21W MA support.
That basically means if you are still holding bags, prepare for a possible drop of another ~10% this week. Set stoplosses where you feel comfortable based on average volatility. I think it will be a day or so, but it could come much sooner.
That said, this is invalidated if we suddenly see strong bullish volume on Bitcoin and close over the 57.6k resistance.
Additional Metrics:
-4h Volume: Recently elevated as we broke from the triangle, but overall decline since mid April
-4h Stoch RSI: approaching oversold range, indicating support at this price range or a little higher in the short term
-Miners: Hodling still.
-Whale Activity: Occasionally elevated, usually in correlation with notable price movements like small dumps/corrective waves. No signs of large inflows or selloffs
-OTC Activity: Industry investment (according to OTC data) remains elevated, at some of the highest levels in years, possibly ever