BitcoinLong
Current Consolidation vs. Distribution of 2021
Some comparisons of the current consolidation with the range from the first half of 2021, which played out as distribution, are circulating. However, there may be key differences to consider. Judging by RSI and OBV in 2021, the only bullish signals were hidden divergences, typically suggesting trend continuation due to underlying buying interest. However, the OBV divergence could also be interpreted in a more bearish context: the higher low occurred due to strong interest in absorbing the existing high selling volume – i.e. there was strong selling ongoing.
This contrasts with the current range. We have seen lower lows, which induced bearish sentiment, but with ongoing bullish RSI divergence. These lower lows are not supported by significant sell volume, suggesting that while bearish sentiment led to heavy shorting, the market was actually in accumulation. This idea is further supported by the volume node in the area where this potentially bullish price action occurred.
Now we know how that played out—shorts were liquidated by short-lived all-time high, which flipped market sentiment toward being skewed heavily in favor of leveraged longs. These longs were subsequently liquidated over the last 24 hours, resulting in total liquidations of $600 million. Currently, the market appears to have a more balanced distribution of longs and shorts. However, there may still be too many longs for market to allow price discovery.
If the range between approximately 90K and 100K was indeed an accumulation zone, it’s likely the market will attempt to remove excess longs and build shorts within a new range above 100K. Those who accumulated below likely don’t want the price to return to that range, as they want to avoid risking an overly bearish shift that could lead to a dump. Additionally, they will need to generate significant buying interest at higher price levels. But for now, there is a need for buildup of bearish sentiment instead—similar to what occurred in the previous range, as discussed in my earlier idea. If this was indeed an accumulation zone, this scenario seems highly plausible. We will see soon enough if a bearish sentiment will be achieved with ranging above 100k.
Previous idea:
This contrasts with the current range. We have seen lower lows, which induced bearish sentiment, but with ongoing bullish RSI divergence. These lower lows are not supported by significant sell volume, suggesting that while bearish sentiment led to heavy shorting, the market was actually in accumulation. This idea is further supported by the volume node in the area where this potentially bullish price action occurred.
Now we know how that played out—shorts were liquidated by short-lived all-time high, which flipped market sentiment toward being skewed heavily in favor of leveraged longs. These longs were subsequently liquidated over the last 24 hours, resulting in total liquidations of $600 million. Currently, the market appears to have a more balanced distribution of longs and shorts. However, there may still be too many longs for market to allow price discovery.
If the range between approximately 90K and 100K was indeed an accumulation zone, it’s likely the market will attempt to remove excess longs and build shorts within a new range above 100K. Those who accumulated below likely don’t want the price to return to that range, as they want to avoid risking an overly bearish shift that could lead to a dump. Additionally, they will need to generate significant buying interest at higher price levels. But for now, there is a need for buildup of bearish sentiment instead—similar to what occurred in the previous range, as discussed in my earlier idea. If this was indeed an accumulation zone, this scenario seems highly plausible. We will see soon enough if a bearish sentiment will be achieved with ranging above 100k.
Previous idea:
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.