Bitcoin's weekly OBV, NVT and Hash Ribbon Bear Market ChecklistTL:DR: The Bear market inflection is NEAR, it has not occurred. More time to accumulate (or get wrecked using margin). QRD: Bottoming structure not yet clear, OBV 10 has not bullishly crossed the 20 below 100 yet. Price still below blue resistance line. NVT shows bear market inflection, as does the Hash Ribbon. Inflection score is 2/6.
Introduction
There are two major concepts this post is broadly dealing with. The first one volume and its interpretation and the second is looking at bitcoin as a payment network with its own native currency. The United States has a payment network and it uses dollars. The European Union has a payment network and it's currency is creatively called the Euro. Similarly, the bitcoin network currency is as creatively named: bitcoin. A trite saying is bull markets end with a roar and bear markets end with a whimper. I am looking for the point where the bear market whimpers its last and we are getting pretty close on a robust set of criteria. With a sorter list of criteria, I think one could already call it based on the Hash Ribbon firing its buy signal while the NVT is green and the OBV 10 and 20 SMA were both under the 100 SMA but I personally can't do that without a bottoming structure and while price is still below the blue trend line.
Volume analysis
There are several proper ways of looking at volume. There is the standard volume by timeframe that many people use, with red or green bars stacked across the bottom of their chart. The volume profile is also very useful for determining where price action support and resistance is supported by volume. Lots of price action with very little volume behind it suggest that the next move could move through that price action quite quickly.
The volume indicator I have spent a couple of years tinkering with is the On Balance Volume with Moving Averages. To keep the charts visually simple I have made the decision to just focus on the moving averages.
A common phrase in trading is exhaustion. Bear markets end when sellers are exhausted. There is no real indicator I know off that spits out a buy signal when sellers have been exhausted so I have been working on a system to determine that. Bitcoin and crypto is very volatile and so the weekly time frame, so far, has back tested quite well. Equities and commodities still need some tinkering with for this system to work.
The bold green line is the 100 SMA of the On Balance Volume. When the OBV is at the 100 it is a sign of some significant sideways movement or a prolonged period of selling from a previous all time high. When the 10 or 20 OBV SMAs go below the 100 we are deep in a bear market where we can expect to get the best value should price recover.
Previous bear Markets
The 2015 bear market had a massive W bottom with the second low being lower than the first low. That would have been very painful for anyone setting their stops for a high low W reversal. The OBV SMAs crossed several times down there and very certainly a lof of traders got whipped out of their positions while investors and smart money did what they could to buy the lows.
The 2018 and 19 bear market bottom was a beautiful ascending trianle that had massive amounts of over-performance to the upside. I spent most of that uptrend waiting for a pullback that never came and that is why looked at creating this system, so I could predict such impulsive moves before they come.
Current Bear Market
The On balance Volume 10 and 20 SMAs are deep under the 100 which suggest a great time to accumulate The 10 has not crossed the 20 yet so the bear market inflection, based on volume, has not happened just yet. Bitcoin does not appear to have a long-term reversal structure yet, a W bottom or ascending triangle seem most likely. It does not seem like we are going to have anything resembling saucers and so far a inverted head and shoulders doesn't seem likely.
NVT Analysis
As stated above, bitcoin is a payment system, called bitcoin, and the currency of the bitcion network. When someone buys bitcoin they are buying currency of that network to use that currency network at a later point in time or to sell to someone else that wants to use that currency network.
This marvelous version of the NVT is very useful as it can help us determine when the currency is relatively cheap compared to how much the network is being used. If we want to use the network for payments this is the time to do it. Likewise, if we want to get a good price on the currency to use later, either by sending bitcoin or selling it we would do that now.
The system is pretty simple with the NVT. If the NVT is green and is moving sideways, not down) we have reached an inflection point with the NVT.
Hash Ribbon
The hash ribbon can be pretty noisy with all of the different signals you can have it spit out. For this system there is only one signal we want, the buy signal, and we only want it at one time. when the OBV 10 and 20 are below the 100 while the NVT is deep in the green. Since we have this the Hash Ribbon inflection has occurred.
After All Signals Fire
Once all signals for a bear market inflection are in we will be in the early stages of the bull market. For me, that will be as the NVT goes into the yellow but before the first flash of red. Around the same time the OBV 10 and 20 SMAs will be crossing above the 100 SMA. This is the area between the black and orange lines on the chart.
What I am doing
I am looking to shovel quite a bit of money into some of my preferred alts so long as bitcoin is below the black line. And by shovel I mean I am selling leave at work as it comes by, picking up overtime, eating more oatmeal and eggs because they are cheap and filling, reducing my vice purchases (only the most affordable box wines for me now). I do see a stall occurring around 46,000 (the orange Line) but I don't think it will be similar to the C19 dump. But I do intend to take off some profit there for pay myself back for the quality of life I have been deferring.
It is still way to early to tell, but I have a suspicion that Optimism might be this upcoming bull markets Solana. I definately have a position on and if it goes above the 2.618 I will be quite happy. If it approaches the 3.618 as Solana did I will be retired by next July.
