New year, new drop. What is the current state on the Bitcoin market? Is this it for Bitcoin? Are we done? What is on the menu right now? Let us have closer look.

After I skipped one market update it seems about time to drop another one. So did Bitcoin (phew bad joke). Bitcoin’s price declined again and lost some important levels of support and demand. The bears won the battle against weak bulls here.

But before we start let me ask you to stay calm. In times of turbulence on the markets it is best to lean back and wait it out until the dust has settled. During these times technical analysis will most likely misguide you. This not only accounts for Bitcoin or crypto but all markets in general.

If it feels like emotions taking over. Step away from the screens and enjoy your time with different things and come back in a couple of days. Many of us had stop losses hit last night and this is normal. I am not an exception, and it is part of the game we are taking part.

Time of turmoil are also time to step back a little, higher the time frame and try to get the big picture. Therefore, for the first we will not only look at Bitcoin but also on traditional markets. The NASDAQ just lost its 200-day EMA on close. The RSI dropped below 40, if you have read my article on the RSI, you already know this means it entered a bear range. So, we have bearish momentum, a trend line lost that was intact since October 2020, price action being bearish with lower high and lower lows. Price just touched an important zone of demand.

The next days and weeks will decide upon whether this area holds, or we break further down. If we go further south here, we are entering a bear market, especially below 14.000. End of January FOMC meeting might bring this decision on the further trend. Currently a rate spike is expected, higher interest rates usually bring lower prices for tech stocks.

What does this all have to do with Bitcoin you may ask yourself. What we observed over the last weeks is, that Bitcoin currently is highly correlated to the NASDAQ. Both topped in November and since then steadily declined in price. If the trend continues, another hit on the NASDAQ could also hit Bitcoin and bring it even further down.

After I spread so much happiness. Let us look at Bitcoin itself. Sorry, but it is not getting any better here. Only for our short sellers. Congrats you must be doing well. Back to the corn. We just lost the demand zone mentioned in the last market update. What lead to the most recent drop? First sign for weakness was the price being stuck within a demand zone for too long. This usually is not a great sign. Rule of thumb, you want the price to be within a zone less than ten candles to keep the idea of a reversal alive. Bitcoin remained in the zone for 14 days without a real attempt of breaking out. A bit too long and the result was the ultimate drop. Luckily right into another zone of demand.

We were able to observe two rejections on the RSI at the crucial level of 40, which was another good sign for even lower prices to come. As you see on my chart, all my DBI indicators shining bright red colour for a while already. Easy to say that this in hindsight, the drop came not unexpected for those taking the signs and drawing their conclusions.

Now that we have looked at the current state and analyzed what signs there were upfront. The most important question we all have, is this the bottom? My honest answer for now, we do not know yet. Nobody knows we can only guess. Everyone who says, he know is just gambling or tries to sell you something he cannot know. As I wrote in my introduction on top, we need to wait until the dust settles. What we can do is look on the options we have on the table right now.

First option, this is the bottom that’s it and we are done with new lows for now. If this is the case, cool we would all be happy for our spot positions and start looking for new longs. Probably not, if this is the bottom, I would expect price to range at least for a while between current lows and $45.000. We need to get back above $45k before we could really aim for new highs and talking about a new bull market.

Second option, we are not done yet. Bears still aim for lower prices and once more overthrow bullish attempts. In that case we would lose the current zone of demand and go below $37.000. Bringing us down $33.000 - $29.000, the next and most importantly so far untouched area of demand. Side fact, untouched zones of demand are best for buying– I should really finish my article on Supply & Demand. A drop down to this zone could also exhaust bears and bring in more buying power. If we reach the level down there and it is the bottom expect an even longer period of ranging prices and accumulation.

What are the odds for both scenarios? For now, I would not bet on any of these or being tempted to name a percentage. We need to wait it out, let the dust settle.

But we did our homework, we analysed the current situation and identified two both potential outcomes. This is already more than most retail players do. With this insight we can prepare for either direction, neither outcome will hit us unprepared.

“The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.”

– Sun Tzu (The Art of War)

For the time being I will stay bearish until proven different from the perspective of a trader. As an investor in Bitcoin, I will place some buy orders around $30k and keep some more dry powder to be prepared in whatever comes next.

I will keep you updated over the next days on Twitter and with my next market update. If you have any questions on my indicators or general chart setup, feel to leave a comment or drop me a DM. I hope you enjoyed the read and I was able to provide you some take-aways for your own research. Cheers!

Bitcoin Market Update #4

Supply & Demand Zones

Inversion and Trading