BITCOIN AMIDST HEADWIND - WHAT ARE THE CHANCES?

16 thg 5, 2023

After an impressive rally throughout Q1.2023, Bitcoin has faced off some of the toughest challenges of this year. Despite of disappointing price action, Bitcoin, as a network and a community, has witnessed immense fee pressure and guiding miner fee revenue towards ATHs.
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WHAT'S GOING ON?
Another week of disappointment where Bitcoin failed to stay above at the 27k level. Satoshi's favourite even reached 25.8k before closing 1D candle just below 27k on 12th of May. The fact that the coin recouped more than 1000 bucks within that day shows some serious effort of buy side to maintain SMA100 (on the daily). This incident causes by 2 possible reasons:

1. Buy side stepped in - SMA100 and SMA200 are some of the simplest yet powerful tools to determine SUPPORT and RESISTANCE. In this case, price action has reached down to 25.8k, coincidently also SMA100 (on the daily) and SMA200 (on the weekly), this shows that Bitcoin is sensitive at these MA levels. So far, this is our reliable support #1.

2. Short liquidation/take profit - as price broke down the first key level of 27k, shorters were ready for short positions. Some shorted at 27k, some at 26.5k or some even waited til 26k (as price broke SMA100 on the daily). However, if you took a short position at 27k on a 20x or even 50x leverage, you would profit an immense 74% to 185% gain. The motivation to take profit was huge, together with buy side in SPOT market, price action quickly rose. At that time, 26k shorters at high leverage quickly got their account burnt out and eventually liquidated.

Bitcoin currently hovers just above 27k with weak trading volume. What could happen from here?
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WHEN IN DOUBT, ZOOM OUT
Looking at the price action for the last 10 days, Bitcoin has been heading south at a fast pace. 29k got taken out by the bears, leaving Bitcoin extremely "ugly" since it created a lower high (compared to 31k high on 14th of April). As the result, 26k - 27k zone currently is similar to a small downward flag. The nearest support is 25k zone, which is also a neckline of prior inverse H&S formation.

Zooming out on 2023 price action, this is NOT the first time that Bitcoin dips further than its consolidation SUPPORT LEVEL. An uptrend consolidation range of 21.8k - 23.1k has been established throughout late Jan 2023 til the end of Feb 2023, after a massive rally from 15k to 23k within 15 days. However, price did a fake break-out at 24.5k then quickly exhausted and fell below 23.1k, which is our then asymmetrical flag SUPPORT LEVEL.

A glimpse of the current price action, Bitcoin also has an uptrend consolidation setup, ranging from 27k to 30k, after a rally from 20k to 30k in March til early April. The consolidation SUPPORT LEVEL is current at 27k - 27.5k zone. Price ALSO did a fake break-out to 31k then quickly plummeted to 27.5k and created a lower high of 29k. What's left is that we are currently sitting below the aforementioned consolidation SUPPORT LEVEL, which AGAIN, is extremely similar to what happened in late Feb 2023.

SMA100 (on the daily) is acting as a reliable support #1, as mentioned above. However, the consolidation of this trend is still intact even if we go down to 25k zone. That's where reliable support #2 is in play.
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ARE WE OUT OF THE WOOD YET?
We are still in a bullish momentum overall. One of the most intriguing thing about Bitcoin is Cycle baseline. This "invisible zone" is seemingly a traditional Bitcoin "specialty" throughout its 15 years of history. Cycle baseline acts as an important zone which divides Bitcoin downtrend into 2 separate sections:

1. Typical bearish section - drawdown from ATH to cycle baseline. This means for a considerable time of the bear market, price tends to aggressively bounce off a certain level, creating a mini impulsive uptrend.

• Assumably late 2021 - 2022 bear market, its baseline is 30k
  
• 2018 - 2019 was 6k
  
• 2014 - 2015 was 300 bucks
  
• 2013 was 90 bucks and
  
• 2011 was 6 bucks.
  

2. Capitulation event - drawdown from cycle baseline to "bottom finder" price action. Price finally breaks out of cycle baseline and reaches a new ultimate bottom.

• Assumably late 2021 - 2022 bear market, its bottom is 15.5k
  
• 2018 - 2019 was 3k
  
• 2014 - 2015 was 175 bucks
  
• 2013 was 65 bucks and
  
• 2011 was 2.3 bucks.
  

Since this cycle baseline acted as a crucial support not only during the drawdown from ATH to the baseline itself, but also, it was a reliable support of 2020 - Early 2021 bullish market when Bitcoin first reached 40k. Such a critical support once get violated, will immediately turn into an extremely tough resistance as soon as price rises back to this level. As the result, we have seen Bitcoin lingering around this level during April before falling to our current price.

On the other hand, this is NOT over yet and we're still in a bullish momentum overall. The comprehensive 2023 rally still displays a healthy uptrend with two crucial consolidation ranges:

1. Late Jan 2023 - Feb 2023 consolidation - upper consolidation resistance of 23.1k and lower consolidation support of 21.8k. Lowest point - 20k

2. Current consolidation - upper consolidation resistance of 30k and lower consolidation support of 27k. Lowest point - potentially 25k - 26k area



This comprehensive 2023 uptrend might be threatened if price dips below 25k or even violated if it goes below 20k. But that's the story for another day.
For now, GEAR UP AND READY FOR THE HEADWIND!