After another crazy week of sell-offs and panic selling, BTC held an end-of-day rally ahead of the weekly close. It closed slightly below the 21-week EMA but managed to hold a larger technical structure by staying above $40k and $41.3k.
$ 40.7,000 was a very key level as it is the highest low, which has already been tested twice and managed to hold up. So far, the pullback from $52.9k to $39.5k has followed a 3 wave move down, suggesting this is a corrective wave, quite common to see after a large rally.
Elliott Wave suggests Wave 2 is almost over
So far, BTC appears to have hit a higher low at $ 40.7,000. The next step in confirming Wave 2 completion will be making a higher high above $45.1k, the intraweek highs from last week. This is critical for short-term price action as technical analysts wait to see if Wave 3 forms on the upside.
Elliott Wave suggests the move from the lows at $29.2k to $52.9k could be the start of Wave 1 to the upside. The recent pullback from $ 52.9,000 to $ 39.5,000 could be the corrective wave for Wave 2. Whenever the bottom is confirmed, BTC is expected to start Wave 3, typically the largest impulse to the upside.
The larger structure continues to hold up as $ 40,000 has been established as a very good level of technical and chain support. During the liquidations last week, cascades of forced selling pushed price intra-day below $40k, with BTC managing to hold support on a daily close with higher volume. This suggests that bigger buyers came in as BTC tested major support at $ 40,000.
3-day and Weekly Chart Still Bullish
Despite a slight weekly close below the 21-week EMA, the 3-day and weekly charts remain bullish when looking at the overall trend and structure. BTC tested the 21 week MA at $ 41.7,000 and maintained support on a weekly close basis.
The 3-day chart continues to show strength especially with the bullish crossover where the 21-day MA crossed above the 50-day MA. This is a medium to long term signal of further upside, often leading to multiple backtests of 21-day MA and 50-day MA support on the 3-day chart, before a big rally. does not start.
The recent volatility pushed BTC down to retest the key 50-day MA on the 3-day chart at $42.2k. BTC closed 3 days below this key level but managed to retreat the next few 3 day candles, a positive signal in the short term. The recent price action on the 3-day chart is very similar to conditions back in October 2013. Stay tuned for in-depth analysis of similar technical and on-chain conditions on why the BTC bull market is rising important to come.
On-chain Metrics Remain Strong
The near-term charts may look bearish, but the underlying strength in fundamental and on-chain continue to trend higher, strongly suggesting the disconnect between price and fundamental will likely close soon. Last week’s selling pressure came from massive sell-offs, emptying the derivatives market, again causing panic in younger coins.
As usual, large investors and entities holding older coins came in and scooped up BTC in the lower $40k range. Even with a 25% drop from highs of $ 52.9k, spot foreign exchange reserves continue to decline. Since the highs from September 7th, 2021, spot exchange reserves have fallen by 11,723 BTC, a strong indicator of accumulation. Spot foreign exchange reserves remain at their lowest for several years as investors continue to remove BTC from the exchanges.
BTC Miners have sold 2,968 BTC in the past week as the market pushed lower from liquidations and panic selling. This may sound like a large amount of BTC, but keep in mind that this is almost 3,000 BTC out of total miners’ reserves of 1,850,000. So far this year, miners remain in net accumulation even with a 55% crash, countless FUDs, and multiple wind-up events. The miners continue to hold BTC, showing no major signs of selling pressure.
The average age of coins by CryptoQuant continues to increase for the week, indicating that long term holders continue to accumulate and hold while younger coins sell out. The mean coinage is not showing any signals of a bear market because previous transitions from bull market peaks into bear markets caused the metric to continue declining.
The May 2021 crash did not result in a significant distribution from long-term holders. Instead, they went back into accumulation throughout the multi-month consolidation between $30k to $40k, suggesting this is a mid-cycle pullback. The overall on-chain data trend continues to suggest that BTC is not in a bear market, and continued supply depletion is likely to result in significantly higher prices in the coming months.
Macroeconomic conditions remain bullish
The SPX managed to print a large hammer candle on the weekly chart last week, indicating risk appetite could be coming back to the market. While sentiment remains bearish as many call for a cyclical peak in the markets, it is important to consider that there are trillions of liquidity left on the sidelines, that the Fed’s balance sheet continues to hit record highs and that the rates remain at zero.
Major tops in the market occur when the majority sentiment turns bullish, funds are fully deployed, and rates have been trending higher. None of this is happening, suggesting that risk assets are still on the rise, potentially until rates start to rise, possibly at the end of 2022 or later. With fiat currencies losing value and purchasing power, investors will continue to search for stores of value, likely making stocks, real estate, and Bitcoin the desirable assets to own in the current macro environment.
