2021-05-23

BTC Waterfall Decline Approaches

My first target for this BTC bear market is $20,000, with a firmer bottom in the range of $12,500 to $14,000. There was support at the $30,000 level, but I think this is a bigger move. BTC has already failed at former support,now resistance at $42k.

I am not shorting BTC. I'm more interested in BTC secondary plays such as MSTR and RIOT, but what I'm really looking at is BTC as a thermometer for speculation and what that implies for stocks. Tertiary plays such as Nvidia and beyond in the Nasdaq, such as Apple and Amazon.

On to the charts. Here's BTC. Everyone was focused on $30k support for good reason: the vast majority of BTC buyers via the market this past year have bought above $30k. Volume in Q1 was 267 million and Q2 is already 159 million BTC. That makes for 426 million transactions above $30k. I have to go back to the 2017 Q4 peak in BTC to accumualte enough volume to exceed what has traded since December. More than half of BTC buyers over the past 3 years paid more than $30k.

Both the chart pattern price support levels are simialr to the 2017 top.
The 2017 peak was in the context of a bull market in financial assets. BTC have never existed during a broad bear market. If BTC can go lower, let's look at the volume profile for a clue. Below I show the 3-, 5-, and 7-year time frames.
Lo and behold, the volume profile corroborates the green horizontal I have on the chart. There is strong support between the green and violet horizontals.
Summary

$30k was a tradable short-term support level

$20k is firm support for a major correction

$12.5k to $15k is support for a BTC bear market

Lower is possible in a broad bear market accompanied by a financial crisis on par with 2008 and March 2020. Perhaps the $1000 area could be tested in a deflationary panic. It would depend entirely on whether the government devalues the currency and if competing coins displace BTC as "digital gold." It depends on if the Tether bubble pops. See: Did Unbacked Tether Creation Manipulate Bitcoin Prices?

I hold BSV, a Bitcoin fork that makes micropayments possible. It can replace both Ethereum and BTC. Unlike other coins endlessly hyped as speculative trading vehicles, BSV is more preferred by developers building applications. (BSV is not listed on many exchanges because it calls itself Bitcoin and the exchanges claim this would confuse investors.) It is implementing the full vision of what digital currency should be. I'm speculating on its survivorship and emergence as the superior blockchain. I think it will get crushed along with everything if BTC collapses, but will add more on the way down.

Finally, here is BTC inverted. It looks like the mining charts I've been buying the past 2 years. If you think about the volume profile in reverse, there's lots of support down to $30k (up on the inverse chart). After that, it's a straight shot to $20k. There is some support there, but it isn't deep because after that, the well of buyers came in around $15 or lower.

The real way to acquire "diamond hands" is by paying a low price. The volume profile says the real diamond hands won't be tested until around $15k.

Update: Here's BSV. Unfortunately, falling BTC will take out the uptrend and probably send BSV down to around $50.

1 comment:

  1. Very useful analysis-this could be huge. I was wondering-could BTC end up being not only a thermometer but indeed a thermostat; in other words, could BTC (and the other cryptos) set the whole thing (stocks, housing) cratering down?

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