Macro Market overview
Data source: TradingView. BTCUSD monthly chart
In the last newsletter we looked at the Nasdaq and wider market conditions. During a bear market it is helpful to zoom out and see the bigger picture. Bitcoin is a new asset that has only been around for 13 years so volatility is to be expected and personal conviction regarding its fundamentals and use case will help us all get through the bear market.
Observations on the monthly chart:
I have identified key macro support levels for Bitcoin (Ticker: BTC) traced from the 2017 market cycle peak. The key support levels are
$19,891 which was the market cycle peak
$17,178 which was the next months high point
$14,051 which has been a key resistance level a few times since 2017/2018.
Volume:
Volume is the life blood of the market. Take note of the significant buyers in 2017s market peak through to the significant selling pressure in March 2020. Significant buyers (FOMO) in Feb / March 2021 through to increased selling in May 2022. These volume spikes can signal a turning point in the market.
RSI: Relative Strength Index
The final indicator included on the monthly chart is the RSI. As you can see the RSI is at 42.01. I’ve added the white line across the bottom and we can see the market on the monthly chart is oversold representing an opportunity for buyers to enter the market at a strong place than a coupe of months ago.
Takeaways from the monthly chart:
3 key support levels to keep an eye on.
Selling pressure is decreasing but remains strong.
BTC bounced off the the 2017 market peak. Now we’re looking for it to back test it and build upward strength.
Although sentiment is low it is better to be a market contrarian. Now is a better time to buy than it was a few months ago. Now may be the best time to buy or BTC could move lower. It is highly improbable to time buying at the bottom so don’t get greedy, you may miss out on these good prices.
According to the RSI BTC is as oversold as it has been since 2019. When an asset is oversold that is usually one of the signals of a good buying time.
Data source: TradingView. Bitcoin historical data on the weekly chart.
The weekly chart is a shorter time frame. Each of the red and green bars represent a 1 week timeline.
I have identified 2 key macro price targets for people to look out for. The reason to look out for these is because depending on how and when they arrive could signal a trend shift. For the market to close above $32,500 (give or take a few dollars) is a good signal of strength. At the moment BTC is producing lower highs and lower lows. We want to see this shift to higher lows and higher highs. Bearing in mind wider market conditions such as the FED and Bank of England raising interest rates again, it could be some time before the market turns bullish again. A long term time preference expectation will help investors cope with the near term volatility.
The light blue line moving horizontally across the chart is the 200 week simple moving average (SMA). Historically BTC has very rarely dipped below the 200 week SMA and when it has BTC has then made a move to the upside. However, historically the monetary environment has been one of quantitive easing not qualitative tightening so it is yet to be seen as to whether or not BTC makes a move to the upside in current market conditions, my expectation is that it will not. However, we may see the body of the candle turn into a wick a then close at a higher price than the week before. If so, this will be a glimmer of light in a dark tunnel of bearishness.
Take aways from the weekly chart:
It is a 54% ROI from current price levels of $20k up to the first bullish signal of $32,500.
It is a 130% ROI from current price levels of $20k up to the strong bull market confirmation signal of $48,000.
Big numbers can take a while to reach. It is best to be setting expectations for these sorts of moves into 2023 - 2024. Do not invest money that you need to be liquid in these market conditions. Arguably a strong strategy is to be building a cash position until markets are a lot clearer. It’s not necessary for retail to get in the ring and compete with the heavy weight traders. They know far more tricks of the trade and have far more time to make necessary moves.
RSI on the weekly is oversold as it is on the monthly chart. We could be anticipating some move to the upside but not a move to a new ATH anytime soon. Don’t get to excited if you see BTC make a move to the upside.
BTC dipping near to the 200 week SMA has historically shown that BTC is at a good purchase price.
Data source: TradingView: BTCUSD Daily chart.
You may now be able to see the trajectory of this analysis… We have worked down from the monthly chart, weekly chart and now onto the daily chart.
The daily chart is a faster time frame than the previous charts. You will see the two circled areas with arrows which identify a base of support in early 2021 and could represent the same now, or not, only time will tell. We are initially looking for the market to close above $22,500 and make its way up to a close above $26,750.
Ideally it would be good to see BTC move back into the channel between the two macro red line markers. It could be that BTC moves sideways in a new lower channel presenting a period of accumulation but for how long nobody knows.
A challenge with the digital asset space is that it moves so quickly so it is healthy to be aware of our emotions to ensure that we are not acting flippantly.
Market Summary
Traditional finance and new asset classes such as Bitcoin and cryptocurrencies are currently full of uncertainty due to the broader geopolitical events.
BTC is oversold on the monthly, weekly and daily time frames meaning there may be a move to the upside.
Key levels on the daily chart are $22,500 - $26,750.
Key support and resistance levels on the weekly and the monthly range from $32,500 - $48,000.
Buyers at current prices would double their investment before BTC needs to go to new all time highs but should not expect that to happen anytime soon.
UPDATE AFTER THE MARKET DUMP
Since writing the above analysis and summary Bitcoin has broken the first macro key support level. Things develop quickly. Essentially, now we wait to see where BTC holds, look for it to retest the support level, build a base and then make a move. Don’t try to catch a falling knife and time the bottom of the market. We are most likely to range in these lower levels for some time given market conditions. Keep an eye out for where BTC closes tonight. These lower levels could develop into a wick as selling pressure eases and buying support comes into the market.
Key levels are $17k, $14k and for BTC to close above $19k.