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BTC 5-22 Daily Analysis

Some Background

My last prediction on the BTC price was invalidated yesterday with a drop below the 3/7 high and retest of the mid-march trendline, which I said was still possible and would confirm invalidation. The recent price action has been quite bearish, possibly because there was no halving pump, and instead a price dump. Along the sidelines are weak and uncertain traditional markets which are still likely to inflict pain on crypto once it enters the second leg of the move down which has only been stalled by central banks' printing. And with new numbers for GDP coming out in six days, the markets will likely not react kindly when the sharp downturn is been officially announced, with -%4.8 as the current forecast from the BEA.

Bitcoin is supposed to thrive in these scenarios. This is something I have written and others on the internet in the space have as well, but the truth is it can only be truly thriving if the rate of adoption is increasing and that is what is driving up the price. Currently the majority of money in bitcoin is speculating on the price and not investing in an ideal bordeless global open economy, which is what Bitcoin was meant to usher into this world.

Lines on the Screen


Now to the analysis, this chart is the Bitcoin 1D timeframe. You'll note there are three main channels. The dark blue is the oldest which dates back to July 2019, with a peak just under 14,000 USD and a recent trough at just under 4000 USD. It is also a more dominant channel as it has been around for a longer period of time. This channel is the only descening channel and is the oldest, this is quite important to understand. The oldest channel has the most say over price action so with it being downwards until a brice break above, holds, and continues furher upwards, the overall bias is still bearish.

The two lighter blue upwards channels have been sequences of resistance. They seem similiar except in terms of overall price movement in which the they are very different. The first channell was a ~%60 increase in 57 days, this most recent one having a lower low to recover from has had nearly triple that at around ~%160 in the same period of time. These rapid increases testing the upper boundary have had similiar build ups, time will tell if they have the simliar downfalls, as the last one fell ~6800 in a 30 days. Many will say there were extenuating circumstances as traditional markets were shook by corona virus lockdowns. As far as I can tell, those fears are still here and as I said the traditional markets are weak and uncertain with a trigger happy fed and other central banks buying up everything from junk to US treasury bonds. If you ask me those should be considered the same thing.

Bearish RSI Divergence

As I have highlighted in my training section, timeframe matters. It implies what weight the trends you see forming have which is a key identifier for timing market entries. In the past week or so BTC has completed a bearish RSI divergence. This is the same picture as above.

Take a look at the RSI in the bottom chart, focus on the ellipses. You can see the price was at weekly resistance, 10,406 USD, when it last was in overbought territory, but just barely touched the dotted line. Now price is well below that trading in the 9100-9250 USD area, while the RSI is well above the previous price action's peak.

If you don't already, it's helpful to have your RSI diveregences table up when trading, which you can find here. I'll refresh you on it, a lower high in price with a higher high in RSI is a bearish sign of future price action.

I would expect a retest of the middle area of this range for support would be likely in the near future. The old 6700-7000 USD range could be a good spot for support to appear as that was a strong support level for an entire year in 2018 before it eventually broke below.

Invalidation

The time hasn't run out for BTC to stay bullish but it would need to break above that 10500 USD level as well as make a higher high than the last time it was there. If it can achieve this and on the subsequent pull back close above that level then this RSI was a fake. Until then the price being ~10 mins from daily close as I post this and it is still under the 3/7 high is not a good sign. Until there is some clear indication of where price is going, it would incur some extra risk to be trading as price could pull an impulsive candle in either direction sharply.