After a complicated start to the year, marked in particular by a long channel phase for Bitcoin ending on the decline, it has been wandering around the $28,500 level for a few weeks now. What to expect next? What are the key levels? Let’s find out together in this new analysis!
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Focus on the macro
10-year US rate
US 10-year yields are calming down slightly after a rally lasting several weeks. This is an important point to take into account, insofar as the cryptocurrency market is a risk-on market. An increase in rates is therefore unfavorable to the latter, and it will be difficult to obtain the crazy performances such as we have experienced over the past 2 years.
The levels that I am monitoring on 10-year US rates are the 2.5 and 2.75% that we have below us at the time of writing these lines, and especially that of 3.25% which is our peak in rates at 10 years in 2018.
DXY (Dollar Currency Index)
If you have read this guide, you know that I particularly appreciate this indicator. I find it particularly relevant to the psychology of investors.
Thus, the DXY will tend to grow in a market that goes from risk on to risk off, and vice versa. We see that as we approach that fateful 103 point level (which we haven’t touched since 2002) the DXY appears to be rejecting that level.
I don’t think that means a reversal of the situation towards a more risk-on market. But it makes sense to correlate it with the recent expansion of US indices.
If you are interested in these elements, I invite you to read our macro point which will provide much more additional information!
From a technical point of view, nothing has changed for Bitcoin. The $28,000-$30,000 still represents a major technical level, which will likely give way eventually. Knowing that a bear market generally lasts at least 1 year, it only started at the end of 2021 on the index market. Being already on $28,500 does not bode well.
Anyway, the key levels are relatively clear:
- The $34,000 – $36,000 represents a dominant level. This is the entry into the value zone, namely the level on which 70% of the trade for the year is concentrated. We also repeatedly worked these levels as support at the start of the year, so they should act as resistance now. It may therefore be interesting to reduce its positions on these levels, in order to average downwards.
- The $23,000 represents a level where we have some volume, which seems consistent because we congested for a few days on these levels after the breakout of the $20,000 in December 2020.
The blue area represents a level where volumes are low, and, by extension, volatility potentially high.
Both up and down, volumes are low. Out of this range, we will therefore probably have great volatility.
In the shorter term, here in 4 hours, we can clearly see that this range reacts very well to the volume profile.
The VAL (Value Area Low) and VAH (Value Area High), annotated here by the blue lines react perfectly. The Value Area is located between these two limits, and it represents the level on which 70% of the volume was traded during this period.
The level to be held imperatively here would be that of $29,300. Here there is a confluence of the Control Point (PoC) of the range as well as the short-term moving averages and MA100. The MA100, here in green, has reacted several times as dynamic resistance, going beyond brings us a first buying signal, a successful rebound on these levels would send us a stronger signal.
Weekly volume profile
The Weekly Volume Profile is a tool that I particularly enjoy using. We see here each weekly candle, as on a more conventional chart, but we add to that the Volume Profile.
Thus, we see very clearly the lack of volume that we were talking about before between the $32,000 and the $34,000.
The last few weeks have been marked by very close weekly candles, with a restricted Value Area. This observation only amplifies my confidence in an explosive movement, whether up or down.
It’s funny that when we broke below the Value Area Low, spotted earlier, the aggressive sellers were completely absorbed by the buyers. We notice this with the end of this candle and its 9 million supply which has been completely redeemed in order to reenter the Value Area.
These pitfalls are particularly visible using the footprint, and that’s why I particularly appreciate this tool.
Open Interest has very clearly fallen following the decline at the start of the year. We returned to levels we had not seen since the summer of 2021, during the correction. Little by little, during this very tight channel in which we are currently, the players are repositioning themselves in the perspective of a next movement. Once again, this accumulation of players, probably placed with leverage, reinforces my belief in a very volatile upcoming exit.
Getting a little closer, we can see the Open Interest rising, which is normal during a bullish move. Nevertheless, this recent bullish leg seems more measured, and the participants less inclined to pull out the lever. This long range probably had to exhaust a few participants, having been trapped on both sides of the channel.
Options are a very important element to consider in cryptocurrency trading. On the one hand, because they can offer very good opportunities (and very big disappointments) if we use them, on the other hand they have a significant impact on the price.
So, I’m watching for major closes coming up in the next few weeks, and the biggest one coming is June 24, when nearly 82,000 bitcoins are expiring. This movement should on the one hand, create volatility, on the other hand, have an influence on the price. The Max Pain Price is located at $35,000. This max pain price is great to mark on your charts, as it often acts like a magnet and pulls the price in as the close approaches. This price is likely to move as we get closer to the expiration date.
Bitcoin Net Realized Profit/Loss
Here we see the chart of realized profit or loss. Recently, during a wick, many operators probably walked out in panic. These spikes in realized losses are often synonymous with local bottoms as we have seen twice recently, just as spikes in realized profits are usually synonymous with local tops.
Here we see a graph indicating Bitcoin entering or leaving the exchanges. For a few days now, bitcoins have tended to come back massively on exchanges, which is generally not a good sign. Bitcoins leaving exchanges are generally accumulated in a hardware wallet (ledger type) while bitcoins entering exchange platforms generally return there to be sold. Taking this practice into account is particularly interesting from the point of view of the psychology of the participants. The recent fall did not immediately have an effect on the arrival of bitcoins on the platforms. Maybe the players are waiting for a pump that would allow them to get out at a better price?
Operators begin to be seriously in fear
Finally, the graph of Net Unrealized Profit and Loss shows us if the participants are rather under water or on the contrary rather gaining on their Bitcoin investment. We can see here that the worst can still happen, given that we are not yet in the capitulation phase (which usually happens during a hasty movement, a general panic). This graph gives us an indication of the state of the psychology of market players. A wick of panic could finish off most.
This article aims to bring together the pieces of the puzzle in order to guide us as well as possible on the next step. The economic situation does not facilitate the expansion of cryptocurrencies, especially alts. In a risk-off context, it is difficult for them to perform. Nevertheless, I think the market is just beginning in terms of time, less in terms of price. By this I mean that Bitcoin is in my opinion no longer so far in terms of the lowest price, but the arrival at this lowest price may take a long time. A -50% is still very much possible (which is not huge when we talk about cryptocurrency), and it is therefore totally logical to favor DCA in your investments. However, be careful with your investments on altcoins which could bleed much more.
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