BTC is often a good macro indicator for the entire crypto market, so this is a good place to start. Bitcoin (BTC) recently topped its all-time high at just $ 20,000, so it’s a unique time to zoom out and look at the weekly chart for the past few years.
The past few weeks have been a rocket ride and we are now bumping into the USD 20,000 technical resistance level. Amid the bullish sentiment fueled by corporate investors like MicroStrategy, this could show up as resistance that will soon break. The $ 11,000 leg up was particularly strong, and this kind of move often has a second leg. So the market does look quite bullish indeed.
Nevertheless, bears will also see the USD 20,000 level as a trade. Typically selling with resistance is a low probability (but good risk / reward) trade as this type of trade usually involves a tight stop. If the bulls fail to capture the 21k handle, the price could drop. Aggressive bears will stop there, hoping to see a sale of $ 17,000 or more.
If you zoom in on the daily chart, the price is in a tight channel. We see the price action on a more detailed scale. You can see the price consolidating recently as it encounters the USD 20,000 resistance level.
Runaway trends are always difficult to trade as it is risky to take a large position after a large price hike. One strategy is to take a small position once you know the trend is in play. You can then manage the trade and add it later at higher or lower prices, and more information is made available to you by the market and other factors.
Steep trends are not very sustainable and will have to correct at some point. If you are buying, it is better to buy closer to the channel’s lower trendline. If there is an extreme overshoot to the high side and the market is pushing a full bear candle down, it may be an appropriate time to go short on the market, although this should be considered an advanced trade as shorting in a bull market done very carefully.
Obviously, the trend has been going on for months. But is the ratio low enough now that we will see a bottom? Perhaps. There are signs that indicate a fair chance. The daily chart above shows a steep channel that formed from October through December, but is now broken upwards by some strong candles.
For such a long bear trend, we would expect at least another push-down and / or a retest of the recently broken channel. Price usually cannot retest an interrupted trendline that is too steep. Still, the price doesn’t seem to come close now, and the candles are small.
The bears cannot push the price further down, so the ball is now in the bull’s field. Will they drive up the ratio again? Things seem poised for a possible turnaround, but we have to assume that the overall bear trend is still in play until the bulls prove otherwise.
This column was written by Jonald Fyookball
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