Bitcoin current market state thoughts

Bears still in control, but their hold is getting weaker

Welcome to another attempt to quantify the often times unquantifiable. See my previous post for some context: Bitcoin has yet to prove itself. We continue to be in this cycle of FOMO shorts at support:

.. And FOMO Longs at Resistance:

59% Ratio is not conducive to a big bounce attempt:

Not that it can’t happen, but it would be hard. With low shorts, and already high longs, a bounce attempt will likely see existing longs taking profits/lessening their losses, and shorts seeing an opportunity. Would take a massive amount of spot buying to propel through that. Could happen, but not the path of least resistance IMO. Fear and greed index and especially the polling side of it, do not look great for a move out of the channel:

Sentiment here though, is very low: https://www.crypto-sentiment.com/sentiment Interesting to see a big difference here. I think the latter is a bit more exhaustive polling approach, so maybe give more weight to it.

In my very unscientific analysis of the Reddit/social media sentiment. Most traders seem bearish and investors/hodlers still have a lot of bullishness. Take that however you want.

The bull case

For the bullish case, there is one, and it is slightly better than before. For the first time in what seems like forever, there was actually some follow though on a bull move. It was very short lived, but did finally see some follow through. The dumps are getting less intense. Many do not pay attention to the order book, but the bid side continues to be stacked: https://data.bitcoinity.org/markets/books/USD Don’t put too much into that, market sellers/buyers move the market and the book can change very quickly. It is also heavily manipulated. However, I have seen a lot of walls get filled and not pulled on Tensorcharts. On the flip side though, I have seen potential evidence of hidden sell walls. Hidden sell walls are slightly bearish IMO, big players are trying to unload a position without shocking the market and willing to pay a big fee to do so. In some cases, the fee can be worth it. A large visible sell wall can cause panic and not allow you to get out at the level you want.

Trend angle analysis

This is now the longest intermediate term downtrend in this bear market 57 days now and counting. The last couple were much shorter 30–35 days roughly. However, the angle of this current downtrend is sustainable. Here is my rationale for that:

I used linear regression and trend lines with the angle turned on, to basically gauge the strength of trends. The angle of attack matches 2017 bull run prior to the parabola…exactly. Meaning this trend angle is very sustainable. Can continue for quite some time. Doesn’t have to end in capitulation like 2017 did, but if it does, that would be the quickest resolution to end the bear. The steeper trends have all proven unsustainable. That is is why so many are expecting a huge bounce again. No momentum oscillators are deeply oversold on the longer time frames, longs/shorts do not support a huge bounce. Can it happen? Yes, of course. Just not the path of least resistance.

My best guess….I want to emphasize GUESS…do not use this information and make big bets with it, DYOR. But my best guess, based on past price history, past bear cycles, is we have to go though a long rounded bottom, somewhere in the range of here to maybe $4K or so. Slow bleeding down, slowly drifting back up, then a new trend emerges.

Bitcoin has often needed to retrace 90% of the full move, but I would not be surprised if we are already in the accumulation zone and the .786 holds. Hard to tell, and the late 2017 move was absurd, but not nearly as absurd as the past blow off tops:

I think if we do break the .786($4358), it is likely we do not spend much time down there. Pure speculation of course, and anything can happen. See the macroeconomics discussion below for a scenario where we could see a deeper drop.

Very near the average length and depth of BTC bear markets: https://docs.google.com/spreadsheets/d/1uskIRbaiRFMWIzB4KeI0LDyHQFhtEVaJ-SmfPc_CpV4/edit?usp=sharing

So, how to play it? Well I think if one wanted to DCA, probably will be a strategy that works. Wait for dips, and make small entries as long as we are in this range. Only do this, if the money you have in this market is money you can afford to lose. More active traders, favor the trend for most of your trades, wait for major swings, avoid trading within the chop. Do the opposite of the Bitfinex longs/shorts. Short at resistance when shorts are plummeting and longs increasing. Can take the counter trend trades as well, buying at support with L/S ratio plummeting, but be cautious with that until the medium time frame trend changes.

Keep seasonality in mind: http://www.acting-man.com/blog/media/2017/05/2-seasonal-trend-bitcoin.png. Also remember to consider market breadth. Alts did have a nice recent bounce. But many of them are still grossly overvalued. Many might still need to retrace the full move from the mania phase before we can bottom:

Other Markets Influence..

Also, keep.. macroeconomics in mind. The equities markets continue to show signs of weakness. There are fundamental issues across the board in that sector. Shiller PE.. Second highest level ever: http://www.multpl.com/shiller-pe/ That ratio would be even worse, if major corporations didn’t use their massive savings from not paying taxes to buy back stock. That and the artificial printing press/quantitative easing. Yield curve inversion, we are close it..is a very reliable recession indicator: https://www.seattletimes.com/business/economy/bond-markets-yield-curve-is-close-to-predicting-a-recession/ Record personal debt levels: https://www.cnbc.com/2018/02/13/total-us-household-debt-soars-to-record-above-13-trillion.html Government debt, I don’t even need to link that one, it sets a record every day. Business debt: https://fred.stlouisfed.org/series/NCBDBIQ027S, https://www.economist.com/business/2018/03/08/americas-companies-have-binged-on-debt-a-reckoning-looms.

Trade wars, not sure what effect that will have, but it could be a potential catalyst.

One problem with all of this, is the media is giving it a lot of attention. Often times, but not always, if the media is thinking one way, the market goes the other way.

What will this mean for Bitcoin? Well we haven’t see a recession in Bitcoin’s lifetime. It was built for this, but is it ready? Money tends to flee risk assets during recessions, and a strong argument could be made that BTC is a risk asset. One good thing, is BTC may have time to bottom and begin an uptrend before a potential recession starts. People could, in theory, see it as a good place to try to get some yield while the rest of the world tanks. Gold and the USD are typically safe havens during bear markets, but could BTC also fit that mold? Time will tell.

Good luck out there. Risk management, learn it, use it, love it.


Originally published at Speculate Freedom.