AMIDST STRONG MARKET FEAR, IS A BITCOIN ENTRY LEVEL AVAILABLE?

Bitcoin, along with the larger crypto-market, dropped the ball after the most recent price fall had echoes of 19 May's crash. With BTC shedding 25% of its value in a matter of a few hours, the market seemed to reset to its September-end levels. For a brief moment, BTC fell close to $42,000. The aforementioned price fall led to a mass wipeout, giving way to over $2.5 billion liquidations across the market. Ergo, the question - Does the macro bullish outlook for Bitcoin remain intact?

The dip was overdue

On the daily chart, Bitcoin’s price had been in a falling wedge structure since the 16 November crash. Looking at the larger structure for the past month, it can be argued that the latest crash to the $42k level was overdue.

On zooming out, a look at BTC’s weekly chart highlighted how after the 4 December crash, the price broke the MA 50 trend-line. During the previous major corrections too, the price had broken below this level in May and then again, in late June. However, it has always managed to hold it.

In fact, this level has acted as a support for the +100% rally from July to November. Thus, as long as the weekly closes above or at least around the 1W MA50, BTCUSD has a legitimate probability of forming support there and starting a new rally. Interestingly, an RSI fractal seemed also to be in play here. As noted in the chart above, a similar RSI structure was seen from mid-2019 to early 2020, as seen from early 2021 to the time of writing. The key catalyst in both cases was the sell-off due to COVID fears.

Interestingly, an RSI fractal seemed also to be in play here. As noted in the chart above, a similar RSI structure was seen from mid-2019 to early 2020, as seen from early 2021 to the time of writing. The key catalyst in both cases was the sell-off due to COVID fears.

However, this crash was more of a combination of multiple factors like the panic among retail investors, tech market crash, over-leveraged crypto-markets, high Open Interest, positive funding rate, and so on.

So, what’s next?

BTC's two main utility indicators continue to rise - A good signal. BTC’s token circulation and its daily active addresses, at the moment, it sat at a 6-month high. In fact, they seemed likely to continue their uptrend too.

Furthermore, the estimated leverage ratio dropped by 22% in just one day.

This was last seen in September when the price dropped by 24% and touched $40k.

Even though volatility was still high, the market seemed to move from FOMO-induced price tops and sell-offs to more mature and sustainable growth while flushing leverage. Nonetheless, with the price structure still tilting towards bearish, despite the bounce, it would be best to be cautious.

Where of entries? does the market stand in terms

This month, Bitcoin HODLers realized the third-largest on-chain capitulation in history, with over $2.18 billion in realized losses. The last time this was seen was back in March 2020, then in May this year, and finally in June when there were $3.45 billion realized losses.

Notably, short-term HODLers were increasingly selling or moving their Bitcoin at a loss, as suggested by the short-term holder SOPR.

Post the price crash, the short-term holder SOPR has been dropping further into negative territory to levels last seen in July.

This means that coins by short-term holders have been increasingly sold at a loss.

While this could be a capitulation before another leg up, there can be two possibilities going forward.

One scenario could be sideways price movement similar to the short-term SOPR drop in May or it could be capitulation before another leg up for Bitcoin's price as seen in July.

When to make the next move?

The taker buy/sell ratio 30 HMA by day and price pairs show that selling pressure is overwhelmingly higher than buying pressure.

In the past, when the taker buy/sell ratio has entered the positive territory of the 1.0-threshold, the price has risen significantly.

Now, while some short-term on-chain indicators are suggesting a bounce, until this metric returns to positive territory, even if there is a temporary rebound, there is the possibility of further decline.

For now, with the price around the 50W MA - A trendline support of the 2021 bull run - If the price is able to hold the support and reclaim the $53k-level, the same could be a good entry point.