Why This Bitcoin Price Pattern Is Causing Short-Term Pain

Bitcoin held crucial support after moving to the downside on Friday It is trading at $37.539. A good old pump brought it back for a weekend from the middle of the $30,000 range, and now you might be paying about $38,000.

BTC trends up on the daily chart. Source: BTCUSD TradingView

at In the short term, a recovery of $40,000 appears to be the most optimistic scenarioتفاؤل, but if price action has had one thing in common over the past weeks, it’s lack of volume.

Kevin Kelly, co-founder and head of global macroeconomics at Delphi Digital, published a Report About possible scenarios for bitcoin. The analyst said leverage positions indicated that a major correction was imminent.

Conversely, Bitcoin price was forming a “major head and shoulders pattern”. Thus, the analyst believes that it is possible for the cryptocurrency to head lower and dive back towards the critical support at $30K.

Source: Kevin Kelly, Delphi Digital

If bitcoin price trends are below $30K, then a re-examination of $20K is possible with the “general orthodox rule”. Kelly added:

However, technical analysis is only one piece of the larger puzzle, especially when it comes to USD BTC. Having said that, an extended move below $30K can cause more pain in the short term for scammers; This price level also coincides with the 50-week moving average of BTC.

A 50% drop, as long-term bitcoin traders know, does not indicate a guaranteed recovery. On the contrary, BTC price saw an 80% correction on its way to new highs.

There have been multiple instances where Bitcoin bounced back after selling +40% only to find that its recovery was short-lived. One fairly recent example is December ’19.

What are the components of Bitcoin Bull Run?

In addition, Kelly said that 85% of BTC addresses are in profit. In the past, price bottoms have seen the number of UTXOs in earnings drop to around 50% or less. This indicates more downside in the short term.

Source: Kevin Kelly, Delphi Digital

In defense of the bulls, long-term owners changed their position and began to pile up after a while, taking profits. However, as the analyst said, this metric rarely indicates an immediate change in price action to the upside.

Looking at the total supply of BTC held by long-term contract holders on a percentage basis, we can see that the trend has begun to reverse. The total supply of bitcoin held by LT holders recently fell at 58.5% but is now back above 61%. Again, this is a good sign in the long run.

Major headwinds for BitcoinIn the short term, is the “slow down” of the central bank’s asset purchases. Kelly said that in previous cycles, the price of BTC peaked at the same time as year-on-year growth in central bank balance sheets.

Source: Kevin Kelly, Delphi Digital

Analyst believes that Bitcoin needs another currency catalyst, a large company adding to its balance sheet, for example, to restore bullish momentum. However, he believes that the trend remains positive in the long term for stockholders. Kelly concluded:

(…) Despite the recent pullback, the long-term chart clearly shows that Bitcoin is still in an uptrend. If BTC has to retest the $20k prior support, we will start to worry even more.

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