After a bloody start to the new year 2022, including a dip below $40,000, Bitcoin is finally seeing green. This analysis will determine if a local bottom has been found and some relief for the bulls.
Options Market Analysis
This coming Friday, January 14th, approximately $690 million worth of bitcoin options contracts will expire on Deribit’s exchange, with a max pain level of $44K, as can be seen below.
Currently, put option open interest is significantly high, which could be due to uncertainty in the crypto market caused by the Federal Reserve Board Chairman’s meeting with the Senate Banking Committee, housing and urban affairs.
It seems that options traders preferred to hedge their portfolios against any upcoming volatility over the next week. The options market data indicate that traders anticipate two significant levels – $38K and $45K – as the possible support and resistance for this incoming expiry.
Technical analysis
Long-term analysis – The Weekly
Over the weekly period, bitcoin was supported by the Ichimoku cloud. Additionally, the marked orange trend line served as support. Technical analysts can interpret this pattern as a pullback towards the mentioned trendline on the weekly time frame.
If bitcoin loses the Ichimoku cloud as support and closes a full candle body inside the cloud, there is a high chance of dropping to $37K. The dotted line now supports the RSI on this time frame. Historically, the last the RSI lost this dotted line as support was amidst the Covid crash on March 2020.
Short term analysis
Over the past few days, the $40-42,000 area has acted as a decent level of support for bitcoin. Since BTC lost the middle line of the Bollinger Bands, the Parabolic SAR has also signaled a downtrend.
On Monday, bitcoin temporarily lost the green zone support but quickly rebounded above this critical zone. Since that reaction to the green support zone, the price has sharply increased (bitcoin is now trading above $43K). However, the parabolic SAR still does not confirm a momentum change in the price action despite the recent hours’ recovery. If the uptrend continues, Bitcoin may target the next resistance at the middle line of the Bollinger Bands over the upcoming days, which is around $45.5-46K.
Chain Analysis – Capitulation?
An interesting on-chain event to highlight was a cumulative net flow of -29K BTC (out) from all exchanges on January 10th. This Netflow was the largest outflow since September 19, 2021. A negative Netflow with this volume usually indicates the “capitulation phase” in the market.
