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Summary of the dissertation
Bitcoin (BTC-USD) approaches “desk loss” when inflation reaches its highest since 1982. This means a 50-day and 200-day moving average crossover. This has already happened several times, most recently in July, and was an counter-intuitive bullish signal. What’s more, there is some evidence from on-chain metrics that suggests that Bitcoin may experience short squeeze, but retailers are losing interest while holders continue to accumulate. It also points out the facts.
Finally, I will point out the important levels to be aware of in order to move forward.
Horrible death cross
If the 50-day moving average falls below the 200-day moving average, desk loss will occur. It happens when prices show a sustained downtrend and can be seen as a signal that market sentiment and momentum are changing. A death cross was seen in Bitcoin in mid-July 2021.
Desk loss Tradingview
When this last happened, you can see an interesting dynamic played. Up to the cross, Bitcoin has significantly reversed the course, going from nearly $ 32,500 to over $ 40,000. When the cross of death happened, Bitcoin fell and bottomed out for a short period of about $ 29,000. However, while this was technically a bottom, it’s interesting that Bitcoin bounced back and continued to integrate on a downtrend for almost a month. Following this, Bitcoin recovered strongly in August and September.
As I write this, Bitcoin is approaching the Cross of Death again, but it has brought about a powerful reversal and is currently trading at nearly $ 43,600. The question is where to go from here. Will recent history repeat itself? You can gather some more insights by examining on-chain metrics.
On-chain metric
Looking at some on-chain metrics, I argue that Bitcoin could be regenerated as it was when it returned in June.
First, it’s important to note that open interest in Bitcoin is once again at a dangerously high level, close to where it returned in April, but below its all-time high, which reached its top in November. is. This situation increases the likelihood of squeezing, which may be a short type. This has already happened to some extent, but it could rise further. Leading to a desk loss in July, Bitcoin rebounded more than 20% and then returned to a downtrend, finding new lows.
Another caveat is that for metrics on the chain, short-term / retail activity is much smaller while holders continue to accumulate. One metric that shows this is the change in the position of the nethodler.
One way to see this dynamics is to use Hodler Net Position Change. This means that the maturity of the coin will change for 30 days. Coinday occurs as BTC units grow older and mature in the investor’s wallet. Coinday is “discarded” at the time of spending and helps generate various lifespan metrics.
Source: Glassnode
What we are seeing now is that the coins are mature / old. In other words, the coin has not changed, indicating a lack of quantity and activity by individual investors. This is usually a bearish indicator. This indicates the integration phase in which smart money is accumulated. However, I expect another leg-up to follow.
The question is how long will it be integrated? Back in July, Bitcoin fell for about a month following the cross of death. This may be enough time for the metric to be reset and another bull run to run.
There is an indicator that there is a short-term pop based on open interest, followed by an integration phase based on the maturity of the coin. The cross of death appeared like last time.
Future expectations
So, we have a theory, but how do we put it into practice in terms of possible trading levels? The chart below shows some parameters and my main expectations.
Bitcoin key level The author’s work
So far, the $ 44,000 level is a line in the sand. If the bull can push it away, I believe it could cause the short squeeze I was talking about and return Bitcoin to $ 46,000. However, following this, I think we will continue to see a downward trend. The net amount of support is $ 34,000, followed by $ 30,000. This is as low as we go and I think it’s a good place to add.
This assumes that the desk loss will be replayed as before. I am not trading Bitcoin at this time and will add it if support is interrupted.
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Nowadays, many want the beginning of the cryptocurrency winter. This is the theory I talked about earlier. But isn’t this too easy? There is a habit in the market that surprises people who think they know what’s coming. Eventually you’ll see the bear market, but overall, Bitcoin is so entrenched in the system that you can’t see the crashes you saw in 2018. If I’m wrong, it will be overwhelming in the coming months. It’s currently accumulating, but I think Bitcoin will raise another leg before it “crashes”. If this is done like the last desk loss, there is a great bull rally on the card.
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