Bitcoin And How It Invalidates Bearish Possibilities
Updated
This is a sentiment analysis. No one can ever be absolutely certain what will happen to Bitcoin - there is the possibility of some new lows, so one should adjust risk appropriately. This is just about the patterns people tend to see, particularly when sentiment is low.
And indeed, sentiment is rather low. The fear/greed index has slipped back into the "Extreme Fear" category (last seen before the short squeeze in August) and funding rates are starting to dip a little into negative territory, showing that traders are a little more excited to short at current prices. We are still substantially up from the 28k low. I'm seeing traders calling for a big double top, and a drop similar to the 2020 COVID crash. I'm also seeing some people still call for 100k+ prices this year. Clearly we're at a decision point, and the narrative for the rest of this year has yet to be determined by collective psychology.
Over the years, I've noticed that in order for price to move up, a maximum amount of fear and uncertainty needs to be reached. In a market that's purely based on supply and demand (sentiment), psychology is the most important thing. On this chart, I've marked periods where a very large percentage of people were expecting a particular bearish pattern to play out. During these moments, interest in the market is usually quite low. Take this analysis where I called the bear trap at
29K: 
Volume was incredibly low, sentiment was awful, and Bitcoin appeared to be breaking down from a bearish wedge.
This is just to show that Bitcoin likes to invalidate the most obvious bearish scenario before moving up. But sometimes, the bearish possibility does play out. Just as when the market is trending up, Bitcoin will invalidate bullish possibilities before moving down to the next low. For instance, people became euphoric once Bitcoin cleared 50k recently. The most obvious bullish scenario would have been to hold above 50k and continue up towards all-time high. It's never that easy.
We're in somewhat of a precarious position in terms of global markets, so it is important to be cautious. Perhaps we see another leg up, perhaps not. But i'm not surprised at all that Bitcoin failed at 50k and is now giving some psychological anguish to bullish traders. This test is always needed before price can appreciate. Failing the test, in my opinion, would be a weekly/monthly close below 40k. The 9 month EMA is just below 40k, which doesn't leave too much room for further downside this week before the weekly/monthly close. 35k can be visited, but buyers would ideally show up there. Needless to say, this is a particularly important week for crypto. If buyers cannot defend price this week, I will lean more towards the possibility that a new crypto bear cycle has begun.
This is not financial advice! This is meant for speculation and entertainment only.
-Victor Cobra
And indeed, sentiment is rather low. The fear/greed index has slipped back into the "Extreme Fear" category (last seen before the short squeeze in August) and funding rates are starting to dip a little into negative territory, showing that traders are a little more excited to short at current prices. We are still substantially up from the 28k low. I'm seeing traders calling for a big double top, and a drop similar to the 2020 COVID crash. I'm also seeing some people still call for 100k+ prices this year. Clearly we're at a decision point, and the narrative for the rest of this year has yet to be determined by collective psychology.
Over the years, I've noticed that in order for price to move up, a maximum amount of fear and uncertainty needs to be reached. In a market that's purely based on supply and demand (sentiment), psychology is the most important thing. On this chart, I've marked periods where a very large percentage of people were expecting a particular bearish pattern to play out. During these moments, interest in the market is usually quite low. Take this analysis where I called the bear trap at
29K: Volume was incredibly low, sentiment was awful, and Bitcoin appeared to be breaking down from a bearish wedge.
This is just to show that Bitcoin likes to invalidate the most obvious bearish scenario before moving up. But sometimes, the bearish possibility does play out. Just as when the market is trending up, Bitcoin will invalidate bullish possibilities before moving down to the next low. For instance, people became euphoric once Bitcoin cleared 50k recently. The most obvious bullish scenario would have been to hold above 50k and continue up towards all-time high. It's never that easy.
We're in somewhat of a precarious position in terms of global markets, so it is important to be cautious. Perhaps we see another leg up, perhaps not. But i'm not surprised at all that Bitcoin failed at 50k and is now giving some psychological anguish to bullish traders. This test is always needed before price can appreciate. Failing the test, in my opinion, would be a weekly/monthly close below 40k. The 9 month EMA is just below 40k, which doesn't leave too much room for further downside this week before the weekly/monthly close. 35k can be visited, but buyers would ideally show up there. Needless to say, this is a particularly important week for crypto. If buyers cannot defend price this week, I will lean more towards the possibility that a new crypto bear cycle has begun.
This is not financial advice! This is meant for speculation and entertainment only.
-Victor Cobra
Note
Well, Bitcoin successfully closed the month near 44k, which is good enough for me to consider that we can see some new highs in Q4. I would also like to see a relatively strong weekly close and some buyer volume returning as we begin October. If we close the week on high sell volume at a lower price, I’ll feel a little more bearish. For now, seller volume is low, but buyers have yet to step in.Note
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