Weekly Recap – 05-15-22

Top 5 by MCAP

Although this recap is mostly all about Bitcoin, it’s still important to discuss the overall health of the Top 5 as numbers 2-5 do have sway in the altcoin world.  

What a week!  The collapse of LUNA and UST sent the crypto market in a fury, all while compounded by some of the worst price action in the traditional market in decades.  The war in Ukraine rages on with no end in sight and hack after hack plague the DeFi landscape, sometimes multiple protocols at a time.  This week was one for the record books and not in any kind of good way at all.  It was likely one of the worst weeks in all of Crypto, since the Birth of Bitcoin in 2009.  

Bitcoin Monthly - Long-Term

The LUNA Black Swan was enough to destroy our $28,800 Swing Low posted last June.  This was a “structure” level.  In other words, losing that level confirms that the long-term uptrend from $3858 (the Black Swan event from March of 2020) is officially broken.  This does not mean that we cannot go up from here but it means we are now three pieces to a confirmed downtrend and only 2 pieces to a confirmed uptrend.  Some could argue that the trend that just broke was actually from the $3120 Low back in December of 2018.

If we use the ATH as our Top of the new downtrend then we have just confirmed the short-term downtrend.  We posted a low in January and a Lower High in March.  Now that we have posted action below the January Low, we are indeed in a confirmed downtrend on the more local price action.  

Bitcoin Weekly - Mid-Term

This Weekly chart is pretty banged up.  You can now see the highlighted local downtrend from the ATH of $69K.  We can also see that our Structure Low of $28,800 was obliterated and replaced by our new Local Low of $25,338.  This went even lower on some other exchanges and some other pairs.  The agreed Low is somewhere around $24,500.

We can see a few things that start to ring alarm bells.  For one, we can see the Falling Wedge.  This is made from the two downward sloping trendlines.  One forming Support and one forming Resistance.  There is also a pretty dramatic Weekly Head and Shoulders but the target would bring us to negative $ value for Bitcoin – that will not happen.  On top of those, we also have a potential backtest which would be expected resistance if we are to climb up to those levels.  

The only time to be Bullish now is when we break above the downward sloping trendline.  

Bitcoin Daily - Short-Term

Daily Levels did get hit pretty hard but there is something to be said about price action when it is an orchestrated attack as opposed to organic trading.  Had we simply swept the lows from $28,800 then we would be left with a ton of price action near the $28,800 level.  That is indeed what we are looking at on the Daily.  The only outlier here is the obvious wick down to no mans land.  Anybody with enough money can borrow 100K Bitcoins and market dump them, that doesn’t make the price action organic, it makes for an outlier.  

So, there is a theory that the Black Swan of LUNA was enough to sweep the low but then it took a dramatic turn of events.  Maybe so dramatic that analysts are willing to ignore the candle altogether.  It’s a concept and it’s worth listening to but nonetheless, we have the data in front of us.  What makes for a compelling story is the amount of action in the Green Box.  

Regardless of where you stand in the LUNA Trials, a move back up to the underside of the channel that Bitcoin fell from is not out of the question.  That would be a huge push into the high $38K’s and it could be the last good levels we see for another year.  Time will tell.

Daily Bitcoin Volume

We had the record 2022 Volume set on January 21st.  That was broken last Sunday but then Monday broke Sunday, Tuesday broke Monday and then Wednesday broke Tuesday,  Follow along here everyone… that means the record was broken four days in a row!  Last Wednesday is now the new record for single volume Daily Candle.  Unfortunately, this volume came in the form of Selling and NOT buying but we are in a downtrend and selling is to be expected.  

Bitcoin Dominance

During the “event” Bitcoin Dominance shot up like a rocket.  What happened here was the entire market crashed, Bitcoin included.  But as Bitcoin dropped 12%, Alts were dropping 30, 40 and 50%.  That’s not including the LUNA-UST mess that lost nearly $40 Billion in less than 24-hours.  That slaughter on the Alts was enough to propel Bitcoin Dominance even with it falling over 10% itself.  Now that is impressive and terrible all at the same time.  Still, even with everything going on, Bitcoin Dominance stopped right on resistance as expected.  44.5 – 45% is the next resistance area and Bitcoin has been struggling there for the last few days.

Bitcoin CME Futures

Say whatever you want about the Futures but these gaps do tend to fill quite frequently.  During that massive dump last week, Bitcoin managed to swing all the way down to a gap that was left back on the initial pump to $66K back in late December of last year.  This gap has been off the radar so long as Bitcoin remained above $28,800 but now that we have broken that level, it’s time to entertain some of these lower gaps.  

$23,685 is the level needed in order to finish filling the gap from last December.  However, that is only just the beginning.  We have gaps down to $7595 but there is no telling that we get down that low.  

$20,930 – Gap

$18,020 – Gap

$16,925 – Gap

$11,110 – Gap

All of the above gaps land within the -85% from ATH Threshold.  Something that Bitcoin has seen after nearly every cycle high.  Will this time be different?

UPDATE: In the process of writing this we have come within $20 of closing the most recent gap from the close on Friday.

Conclusion

No one can debate teh Downtrend.  What does that mean?  Well, it means that every Long is a counter-trend trade and the odds of its success diminishes greatly.  We have been watching the interactions Bitcoin has with it’s respective Support and Resistance Zones over the course of the trend.  There is a chance we come back and test the underside of the channel as we were in a healthy channel for a few months before breaking free.  That type of run would lead to a false rally and a lot of traders would get hurt – so there is a good chance for something along those lines.

Another theory is just playing the Fib Bounces.  Looking for a 50% or a 61.8% bounce is not unusual for Bitcoin, especially after a hard fall and things start to settle out.  If that is the case, then we can look to the most local action we have.  Expect to see a lot of movement this week as the Bears are either looking to stake their claim in the massive victory they had last week or the Bulls are going to show up to let the Bears know that last week was an outlier and not a true representation of what the Bulls can do.

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