BTC - An Alternative Bearish Macro Scenario
Updated
Hello again! So far it would seem that we have begun our descent following the breakout from the tightening range in the upper 9k region. Even though I think lower lows are eventually coming, bears should not become too overconfident just yet. If you carefully examine the past market cycles, you will see that we always had two macro highs in this area of the bear market. In the first bear market cycle the second top of the flat correction was a lower high but in the second bear market BTC actually ended up creating a higher high on the macro scale.
Pay close attention to what exactly happened in 2014. The price managed to create a higher low of 317 dollars after its peak of 410 dollars. It then surprised everybody and rallied back up again, breaking its linear resistance line and putting in a higher high of 470 dollars. BTC actually ended up building short term support on its prior diagonal resistance line on the linear scale chart (not possible to see on this log chart). The pump also took out two prior macro highs which caused a spectacular cascade of stop orders being activated. The volume spike caused by that was the biggest in bitcoin's history at that point. However, it only pierced the logarithmic resistance line with a wick. The market should have been bullish. After all, we put in a higher low and a higher high. Nevertheless, we did not manage to hold any of the important support levels so bitcoin ended up capitulating to 160 dollars.
Something similar may happen this time. Many of the permanently bullish analysts are drawing a diagonal support line that is represented by the bullish (green) support line on this chart. So it is possible that the whales may want to fool the bulls by bouncing off this line once again. There is strong support there in the 6k area because of the 200 week moving average and the 61.8 Fib retracement line. After the bounce we could end up rallying back to 10k and possibly even breaking our linear resistance line based on absolute highs. A massive scam wick could even go all the way up to 11.8k to fill the CME gap to get the only bullish price magnet dealt with before we capitulate. We would then have the perfect scenario for a massive market crash when everybody is overwhelmingly bullish because of the higher high.
Here are the three most likely scenarios that could happen in order of likelihood (my personal opinion of course, not financial advice):
1) Bear Scenario A - we keep dropping until we find strong support after which we bounce and put in a higher low in the macro picture. After that the price would go back up again to create a higher high. We would then drop back down and capitulate to the 2-3k region.
2) Bear Scenario B - the bulls are unable to hold any meaningful support lines and we keep dropping harder and harder until we capitulate.
3) Bull scenario - we find support at the 6-7k region and consolidate for a long time, forming a reaccumulation zone.
Remember, nothing is for sure because fractals only play out until they don't but it is a good idea to pay attention to them while they do. My advice would be not to short support or long resistance. I will definitely not allow my winning shorts to become losing ones so I will take profits when necessary.
This was a long post so my next one will be after a significant market move has happened. Feel free to follow me for my next update.
See you! :)
Pay close attention to what exactly happened in 2014. The price managed to create a higher low of 317 dollars after its peak of 410 dollars. It then surprised everybody and rallied back up again, breaking its linear resistance line and putting in a higher high of 470 dollars. BTC actually ended up building short term support on its prior diagonal resistance line on the linear scale chart (not possible to see on this log chart). The pump also took out two prior macro highs which caused a spectacular cascade of stop orders being activated. The volume spike caused by that was the biggest in bitcoin's history at that point. However, it only pierced the logarithmic resistance line with a wick. The market should have been bullish. After all, we put in a higher low and a higher high. Nevertheless, we did not manage to hold any of the important support levels so bitcoin ended up capitulating to 160 dollars.
Something similar may happen this time. Many of the permanently bullish analysts are drawing a diagonal support line that is represented by the bullish (green) support line on this chart. So it is possible that the whales may want to fool the bulls by bouncing off this line once again. There is strong support there in the 6k area because of the 200 week moving average and the 61.8 Fib retracement line. After the bounce we could end up rallying back to 10k and possibly even breaking our linear resistance line based on absolute highs. A massive scam wick could even go all the way up to 11.8k to fill the CME gap to get the only bullish price magnet dealt with before we capitulate. We would then have the perfect scenario for a massive market crash when everybody is overwhelmingly bullish because of the higher high.
Here are the three most likely scenarios that could happen in order of likelihood (my personal opinion of course, not financial advice):
1) Bear Scenario A - we keep dropping until we find strong support after which we bounce and put in a higher low in the macro picture. After that the price would go back up again to create a higher high. We would then drop back down and capitulate to the 2-3k region.
2) Bear Scenario B - the bulls are unable to hold any meaningful support lines and we keep dropping harder and harder until we capitulate.
3) Bull scenario - we find support at the 6-7k region and consolidate for a long time, forming a reaccumulation zone.
Remember, nothing is for sure because fractals only play out until they don't but it is a good idea to pay attention to them while they do. My advice would be not to short support or long resistance. I will definitely not allow my winning shorts to become losing ones so I will take profits when necessary.
This was a long post so my next one will be after a significant market move has happened. Feel free to follow me for my next update.
See you! :)
Note
The chart is a bit cramped due to TradingView's compression so in the future I will only show the last two market cycles to see things more clearly. I will have to redraw the volume profile to do that.
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