Readers of my market regular market analysis may remember the last time I wrote about Bitcoin, the post attracted a huge number of comments, some positive but mostly negative and strongly worded, when I dared to suggest Bitcoin was likely to see further longer term weakness. The post was written in February when Bitcoin was trading around the $10,000 region, and I suggested the star cryptocurrency was likely to be heading lower longer initially towards the $4,200 area and once this was breached, a deeper move lower was then in prospect.
For Bitcoin traders, the ultimate direction for the crypto is irrelevant, since it is just a question of trading long or short accordingly and using volume price analysis as the underlying methodology which reveals the true balance of buying and selling. For investors, it has been a tale of woe, particularly for those drawn into the crypto bubble which is now deflating and no doubt in due course, the sad stories of investor losses will filter through to the mainstream media.
And so the daily chart, where the extended period of congestion in the $6400 region offered some hope for longer term investors and where the volume point of control now sits on the futures contract, with deep resistance overhead in the $6,600 region and denoted with the red dashed line on the accumulation and distribution indicator for NinjaTrader. The 14th of November proved to be the seminal day, with a wide spread down candle on high volume as the sellers moved in strongly, driving Bitcoin lower and repeated several times over the last couple of weeks with rising volume as the price waterfall developed and confirming the very bearish sentiment now prevailing. The price patterns here are very typical, with each attempt to rally associated with narrow price action and high volume as the sellers continue to offload into weakness, with only minor support now in place in the $3,580 area.
So the question now for investors is where next? And in the short term, we are likely to see a bounce as some see Bitcoin as cheap, given the heady days of five figures, and so delivering short term rallies as a result. Longer term on the weekly chart from Investing.com, the next level of technical support now awaits below in the $2,800 where again the cryptocurrency may find some support, and which could provide a solid platform. However, if this is also taken out, the next level is some way below. Much will now depend on investor confidence which has been badly shaken. If sufficient believe Bitcoin will surive and flourish then this level could hold, if not, volume as always will reveal the true balance of sentiment and the future for Bitcoin.
By Anna Coulling
Daily chart from NinjaTrader
Indicators from Quantum Trading
Hi and thank you for your analysis. I’ve read some of your books and I found very helpful to been profitable trading this market.Please could you suggest how can I focus to understand the tests in crypto? Do you consider that we have right now a stopping volume? I don’t see enough volume to turn the trend. Thanks ffor your help.
Hi Javier – thanks for your comments and delighted you enjoy my books and helped you to become a profitable trader, which is excellent. With regard to Bitcoin, at present I do not see any signs of stopping volume for the longer term reversal in the bearish trend at present. Of course intraday and faster timefraes you would see them, but not at present on the daily/weekly. You will also see investors stepping in as the currency becomes ever ‘cheaper’ but not in sufficient volume to reverse the trend as too many have been frightened out by the relentless fall from the highs. – all best Anna