Bitcoin Market Structure Turns Bearish as Coin Enters High Value Area
Bitcoin is in a bit of a bind, having broken market structure to the downside despite a regime of negative funding in futures markets.
Meanwhile, a fresh report revealed that another 33.7 million people will be using crypto by the year’s end.
Let’s dig in.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is 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.
Thank you for reading.
Feel free to contact me with feedback on firstname.lastname@example.org.
Crypto Usage in The United States Expected to Rise 70% In 2022
A survey by Insider Intelligence reported that 10.7% of US crypto owners will use their cryptocurrencies as a means of payment this year amidst an ongoing upswell of interest in the industry.
Read the full article here!
Bitcoin Enters High Value Area
Bitcoin/Dollar trades at $38,400 at the time of writing, down -3% week-on-week.
After a weekend of being trapped within a range of $39,200 — $39,900, BTC/USD fell further on Monday, breaking the 3-month long trend.
The breakdown in market structure informs price-action probabilities for BTC/USD moving forward. The next cluster of support is around $36,000 — the previous low holding key high-time-frame liquidity. Beyond that, $30,000 is the macro structure support. As such, sideways chop near $36,000 — $40,000 or further downside are probable unless traditional markets reverse.
On the flipside, BTC/USD could perform a little miracle of its own soon. Instead of turning water into wine, it could turn hades into heaven. But until $40,500 is reclaimed with follow-through volume, there’s little reason to expect a sustained reversal while tradfi pushes new lows.
Locally, price-action has been characterised by slow bleeding downwards without upward retests (H4), indicating a lacklustre bid after the trend breakdown. Essentially, market structure is a tailwind for bearish rationale, despite the regime of negative funding rates on futures contracts. The macro Fed-driven risk-off environment in equities is a headwind for Bitcoin, with Nasdaq futures dropping another -1% at the open on Monday.
Value Buyers Accumulate BTC
However, a technical relief rally is probably close. The Dollar index ( DXY) has reached historically significant monthly highs, as risk-off sentiment prevails and monetary tightening continues. This is a place to look for a correction in dollar strength.
At the next FOMC meeting, the Fed must decide whether its feasible to raise rates by 50 or more basis points. Currently, the market is pricing in a 0.75–1% rate hike with a 97.6% probability.
Still, Bitcoin has entered an area of robust volumes (see VPVR) where long-term value buyers step in. Google searches for Bitcoin have also dropped to levels not seen in two years, so crypto tourists have left and the market is essentially made of hardened veterans. Bears are basically trying to bleed a stone from here on out. Anecdotally, psychological warfare against Bitcoin holders has also turned into overdrive on Twitter.
They seem to have forgotten why Bitcoin exists — to replace the entire legacy monetary system for a better future.
All in all, Bitcoin/dollar is in a bit of a bind. But when prices slide lower that’s when value buyers pay attention to scoop up the blood.
p.s. This is my opinion. It is not financial advice.
You can also support me in Bitcoin!
BTC address: 3EydsEYpjHn68axKnCUqBB7EbqcxrEjamr