Technical Analysis

Ascending or descending bitcoins? This is the problem


This analysis was written by the guest analyst, Mr. Emad Koosha, and Digital Currency has not made any technical changes to this analysis.

Bitcoin has been fluctuating in the price range of 30 to 40 thousand dollars for almost 2 months; Of course, in this range, traders can get a good return with a strategy based on neutral markets; But for investors and hoodlers, the question is, will Bitcoin finally continue its long-term uptrend after Howing, or is it currently in the medium-term, $ 65,000, the peak of bitcoin prices, and are we currently in a recession or even downturn like 2018?

To answer this question, we must examine the probable scenarios for Bitcoin and try to choose the most probable scenario from among them. In this analysis, we have tried to find a more probable scenario by examining the possible scenarios as well as the actions required for each. We use technical analysis tools and network and market data to achieve a possible scenario. Of course, you will also see educational tips and recommendations in the text of the analysis.

Technical review

Bitcoin has experienced a downward trend to the range of $ 30,000 after reaching the $ 65,000 mark in mid-April 2021. The current $ 30,000 range is a valid support with technical analysis metrics. The reasons for this credit include the following:

  • Number of collisions (approximately 10 times)
  • Overlap with 38% correction Fibonacci range
  • In the $ 30,000 range, buyer support comes with an acceptable amount. Also, the validity period of this support (approximately 200 days) was appropriate for the support.

According to the technical analysis, the more valid the support or resistance range is broken, the faster and bigger the price movement is; So if this digital currency crosses the $ 30,000 support level, it could experience a bigger and faster downtrend. Now the question may arise for you that when the price of numbers below $ 30,000 is experienced and then quickly returns to the upper range, how can we be sure that the $ 30,000 range will not be broken?

If we return to the issues of price action in technical analysis, we find that there are different views on breaking a support or resistance range. Based on the performance of Bitcoin, the formation of a 4-hour or even daily candlestick after breaking a range with the appropriate volume and shape of the candlestick (relatively large candlestick body) can be measured. Breaking the upward trend line of the RSI oscillator can also be a good sign.

The bottom line is that ultimately any analysis is wrong, and you should try to avoid fick breaks (the price goes the wrong way after breaking) and recognize them; However, you may still make a mistake. Accepting the error as well as managing the number of errors and minimizing the cost (loss) resulting from the error of our problem.

After the above explanations, it is better to go to the possible scenarios. One scenario (first scenario) is breaking the 30,000 range and then a sharp and deep fall of bitcoin.

Bitcoin price chart
Bitcoin price chart

The next scenario (Scenario 2) is bitcoin fluctuations in the range of $ 30,000 to $ 40,000 in the medium term. The same scenario has happened in the last two months, with Bitcoin fluctuating between $ 30,000 and $ 40,000 and $ 36,000 playing a significant role.

Bitcoin price chart
Bitcoin price chart

In this scenario, the bitcoin will fluctuate in the range of $ 30,000 to $ 40,000 so that there is a sign of buyer support to break the $ 40,000 resistance or sellers try to break the $ 30,000 support. This sign can be ascending or descending speed, price patterns, ascending or descending major pivots, time triggers, etc.

In the third scenario, Bitcoin must first break the downward trend line shown in the picture and move towards higher prices. Our advice is not to be optimistic about the uptrend of Bitcoin, so as not to break the downtrend with strength.

Bitcoin price chart
Bitcoin price chart

In the event of the third scenario, different short-term and medium-term price targets (until the end of 2021) can be presented.

If the third scenario occurs, the strength of the buyers is assessed and presented with price targeting tools. At the moment, the $ 60,000 range can be considered the first valid resistance, and in the meantime, the $ 48,000 and $ 55,000 ranges can be declared as Fibonacci levels, 61.8 and ٪ 78, and as important levels.

An overview of network and market data

Ascending or descending bitcoins?  This is the problem

The 7-day moving average of the net bitcoin transfer index from / to exchanges has been negative in the recent bitcoin ascent. The value of this index is approximately -700 bitcoins, which shows that on average, bitcoins have been withdrawn from exchanges in the last 7 days. As a result, it can be said that investors and activists, after buying bitcoins, are likely to take them out of exchange offices and keep them in their wallets. If the negative trend of this index continues, it can strengthen the third scenario.

The 7-day moving average of the new Bitcoin addresses started its downward trend in the range of $ 65,000 and has stopped in the current neutral trend. If the trend of new bitcoin addresses goes up, the third scenario will be strengthened and if the neutral trend continues, the second scenario will be expected. Finally, if the bitcoin continues to decline, the probability of the first scenario can be considered higher than the others.

The two indicators we examined are important indicators that can help you. However, considering the UTXO bitcoin accounting system, as well as data related to exchanges, derivatives, miners, etc., more comprehensive analysis can be provided. The analysis suffices with these two indicators.

Conclusion; Which scenario should we choose?

The recent rise of Bitcoin from around $ 30,000 is showing signs of slowing down. According to the author, technical analysis is an analytical skill that is delayed, that is, it can not be predicted and must be decided based on market conditions and signs over time.

The behavior and inclination of buyers and sellers may change over time, depending on the underlying factors and the news; But a scenario needs to be defined as a basis for making a decision based on it, and if we see a new sign or a change in the behavior of market players, we should try to change the scenario we want.

Given that Bitcoin has not yet been able to reach its downtrend with the recent rise of Sharp, the second scenario seems to be a more appropriate scenario. That means it may continue to be neutral, unless we see support and a good Pivot in the $ 36,000 range. In this case, there are signs of ascent and therefore the third scenario becomes more likely. But in the bigger picture, we have support in the $ 30,000 range, which indicates that sellers are getting stronger, that is, they are forming at lower price levels. That is, scenario 1 is also unlikely. How do we decide? Decision indicators are specified in the table below:

Ascending or descending bitcoins?  This is the problem

Given the above, our proposal is to focus on the second scenario, which can be a good roadmap for market participants. Given the positive correlation between Bitcoin and Altcoins, maybe writing a script for Bitcoin and having a roadmap can help you make a decision. Which scenario do you think is more likely?

This analysis was written by the guest analyst, Mr. Emad Koosha, and Digital Currency has not made any technical changes to this analysis.

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