Bitcoin Reclaims $40,000 Amid Market-wide Turnaround. Where is the Liquidity?

4 min readFeb 8, 2022

Bitcoin both reversed and extended gains since Friday as buyers scooped up the increasingly illiquid cryptocurrency whose sale is fast coming to an abrupt end. The question is: as the relief rally persists, who is caught offside?

Meanwhile, Litecoin developers officially integrated Mimblewimble through extension blocks on the Litecoin network — the most consequential update for Litecoin since segregated witness.

Let’s dig in.

Litecoin Developers Integrate Mimblewimble (MWEB) Extension Blocks

Litecoin, a decade-old cryptocurrency has released its long awaited network update called Mimblewimble through extension blocks — also known as MWEB.

This is the most consequential updated for the Litecoin network after the activation of Segregated Witness (SegWit) a few years ago. This is the largest privacy-focused update to ever be developed and implemented on a top cryptocurrency.

Check out the full article here!

Dear readers,

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.

Thank you for reading.

Feel free to contact me with feedback on contact@chrisoncrypto.com.

Technically speaking

Bitcoin Reclaims $40,000

Bitcoin unceremoniously crossed the $40,000 barrier last Friday, rubbishing expectations of fresh local lows for the time being.

The number one coin extended gains throughout the weekend and is sitting pretty on a 13.7% pump week-on-week as it exchanges hands at $43,700.

BTC/USD tore through resistance on Friday afternoon, accelerating higher in the following days as short positions were forced to cover their positions (buy back).

In fact, according to data from Coinalyze, $94.3 million shorts were liquidated on the day, marking the highest bitcoin short liquidation cascade since Dec. 4th. when BTC/USD was in the midst of a medium term downtrend. The (as yet) interim trend reversal also registered on the Relative Strength Index (RSI), which witnessed a trend break that complimented the surging price-action.

However, BTC/USD is fast approaching a pivotal (S/R) level, the reaction against which could dictate whether the coin retests lower levels or not. Specifically, if BTC/USD closes a full-bodied daily candle above $44,600, that would mark the first higher high within the multi month downtrend. Consequently, it would set the stage for a higher low to develop within the following days and weeks.

Currently, prices trade above the 20-daily EMA ($40,150), which would be the first noteworthy support in the event of an-intra day corrective leg.

However, a larger rejection without reclaiming the pivot would indicate that $33,500 is well in the cards. If prices fell through that floor, then the monthly super-trend support at $29,500 would be next.

Liquidation cascade in the making?

Having said that, market participants seem to be overwhelmingly bearishly biased right now.

Per data from Coinalyze, aggregated funding rates (-0.0144) across all exchanges are as low as they were on Dec. 4th and July 24th. On Dec. 4th, BTC/USD witnessed a relief rally which lasted 3 weeks, while on July 24th, the pair had broken the downtrend which would eventually lead to the all time high of $69,000 several months later.

Considering the perpetual futures data, the similarities between July 24t and current price action are striking.

Should this context persist (i.e. negative funding), it’s conceivable that BTC/USD won’t stop until there’s a speedy move higher that takes out liquidity and resets the OI/mkap ratio. Whether the magic number is 50,0000 or $60,000 is debateable as is this analysis.

At the time of publishing, however, the theatre of war appears to be tilting in favour of team green.

Catch you later.

p.s. This is my opinion. It is not financial advice.

Join the Telegram channel for live updates & setups!
Follow me on Twitter & Gab and my social portals below.