$2 Billion Crypto Longs Liquidated; Has Bitcoin Bottomed?
Bitcoin nuked to levels not seen since September, recording over $2 billion liquidations in under 24 hours. Have the crypto markets finally reset?
Meanwhile, as Spot ETFs open up in Canada, US regulators are getting no small amount of scrutiny for rejecting similar financial products in the United States.
Let’s dig in.
Fidelity Spot Bitcoin ETF Launches In Canada As SEC Falls Under Scrutiny
The world’s third biggest wealth management firm with over $4.2 trillion in assets under management launched a spot Bitcoin exchange-traded fund (ETF) on the Toronto Stock Exchange this month. Spot Bitcoin trading is now live.
Meanwhile, the US SEC has outright rejected all spot crypto ETF applications so far, risking capital flight to more welcoming jurisdictions.
Check out the full article here!
The purpose of this newsletter is to provide context to cryptocurrency markets. This analysis takes time to write-up and it’s released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent. I am also working on keeping my wording simple and to the point. Please bear with me.
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Bitcoin Nukes to Weekly Support
The Bitcoin correction intensified over the weekend when the crypto dipped below $45,000, resulting in a major liquidation event that took BTC/USD to $41,600 ( Bitfinex).
The price correction resulted in a 10% loss within an hour. Overall, Bitcoin is down 18% this week and is threatening to drift into bear market territory.
The coin closed below the 20-weekly EMA ($52,200) suggesting that a recovery might take some time before materializing.
However, the coin has yet to break below the weekly trend, with both the super-trend and 50-EMA offering support Where bulls held the line so far. On low time-frames, BTC/USD is a seller’s market, but the same cannot be said on higher time frames.
Levels to watch
- Weekly close below $44,600 suggests prices below $40,0000 are probable.
- Weekly reclaim of $52,000 — $53,000 suggests current market action is a deviation within a broader uptrend.
Futures Reach a Pivot point
The futures market has cooled off and is showing signs of a probable bottom.
Time and again, futures data has proven to be one of the most consequential data points for detecting pivotal moments in the market. Per the above chart, the open interest to market cap ratio is once again at a pivotal point. Both 1.8 and 1.4 values are directly correlated with market direction, as noted last week. The systemic risk liquidity event has occurred, with OI/Mcap ratio signalling that $41,600 was the bottom.
No doubt, this was a frustrating week for crypto markets as investors went Risk-off mode. The Open Interest (OI) flush reached hit $2 billion in liquidations in just 24 hours on Dec. 5th, sending OI tumbling to levels not seen since October 4th.
Current data comes with a context of extreme negative sentiment, with the fear and greed index showing a value of 16, down from 18 on Armageddon day (Dec. 5th).
Coins on Exchanges tick Higher
Notably, BTC on exchanges has begun to tick higher, which could be indicative of a potentially long consolidation move.
While the data has yet to come in, increasing bitcoin deposits on exchanges coupled with a BTC/USD price recovery would be a red flag. Back in May, deposits on exchange increased and the bitcoin supply flood in the market pushed Bitcoin to $30,000.
Putting it all together
Every couple of months or so it seems that crypto markets become over-heated, resulting in a liquidation flush and subsequent consolidation before continuation higher. During this bull run, we’ve had three significant liquidity events that were followed by choppy price-action before new highs materialised. Funding rates are also negative while the weekly trend remains in tact, providing an opportunity to Dollar-cost-average (DCA) into crypto. To do this, one must zoom out and realise that price could take a while to recover, but negative rates coupled with a liquidity event are indicative of a market bottom.
Catch you later.
p.s. This is my opinion. It is not financial advice.
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