Bitcoin (BTC/USD) stabilizes near-term, but risk remains to the downside

Market Commentary

As expected there were a few retests of sub-3800 $ levels yesterday due to what were still quite bearish technicals at the time, one of which established a new local low at the 3730 $ level, although to our surprise the market bounced sharply off of those new lows back to the upside above 3900 $ during the Asian session which has shifted the near-term technical outlook more bullish since yesterday. Granted, there still isn't much for the bulls to work with from a medium to long-term perspective, which we'll discuss another time, however the longer price can stay above the 3550 $ area the better the odds are of eventually seeing the rally up to the 4800 - 5200 $ region that we discussed at length last week. While we still think this outcome is unlikely, it remains a possibility nonetheless, but if 3550 $ breaks then 3k $ is probably coming in short order.

4-Hour Chart

We'll zoom into the 4-hour chart today for a more granular view of the short-term setup after the overnight rally and we can see that the demand area was able to provide enough support to spark a reversal signal following the final rejection down into that area which was followed up by a CR UP confirmation overnight on a neutral signal, all good signs for the bulls moving forward, although the recent candle formations have been lackluster as the still bearish 50 SMA continues to act as resistance so we don't expect too much action over the near-term. Also note that the EMA's are still slightly bullish and are acting as support for now and market structure is trying to improve via a short-term higher low above 3474 $, however the longer-term moving averages remain bearish, strong dynamic resistance continues to build overhead, and the Ichimoku Cloud is still growing more negative out in front of the market, so the bears are still in control despite taking a breather recently.

Moving on to momentum and volume, notice that Willy, RSI, and the Stochastic are all trending higher now with plenty of room to run, MACD is close to crossing back above its zeroline, and PPO is back to neutral, all of which suggest that the bulls could have enough gas for another leg into the 4000 - 4100 $ area before the bears return in earnest. Additionally, while exchange volumes continue to favor the bears, the A/D line and volume profile setup are fairly bullish which is another reason why there could easily be more near-term upside before the bears move back in to test stronger support in the 3550 region $ (which we think is very likely at some point. Overall we think that price is likely to continue to chop around between 3700 - 4100 $ over the coming days which is why we are staying neutral until further notice.

Market Summary

While it is encouraging to see the mid to high-3000's $ attract enough buyers to keep the bears at bay despite the still overwhelmingly bearish technical setup, we're not sure how much longer they can continue to play defense considering the current state of the charts as well as the state of the network fundamentals right now. No doubt we think that talk of miner death spirals and double-digit prices are way overblown and are likely a sign that we are close to capitulation, but it also means there is a lot of work to do in terms of healing the market enough to create a solid foundation for the next bull cycle. Granted, we are certain that this will happen eventually, but as we've said before its probably a good idea to prepare for at least another 6 - 8 months of crypto winter before the rays of bull sun are seen again.

 

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