9.21.2020 Weekly Outlook (Mon)
Last week’s setup yielded 9%+ BTC gain with no leverage. Did you get onboard?
The current market is reaching the 11.3k resistance and might need to cool down for a bit. The ideal short-term accumulation zone is around 10.5-10.65k. The key level to watch out for is now 10.1k. If we drop below this zone, we may temporarily switch to a short-term bear trend, and the strategy will alter accordingly. Before then, the key is still buying dips, and the CME institutional positions is still indicating bullish trend for the coming months. Given the current SOPR level, we may have a “decr. in supply” alert to signal dip buying next week.
Let me emphasize this one more time: we are in a bull trend for mid to long term! Smart money’s buying, and there have been more retail traders on the short side compared to the long side, and this is exactly what’s needed to fuel a bull run.
Smart Money Action
The on-chain smart money actions are now stable at a bullish level and are higher than the July level when we had the 10k break out. This not only is similar to the on-chain developments before prior bull runs, but also indicates a strong support at 10k. Institutional investors showed picked up interest in the crypto space as Grayscale raised $900M in Q2 (its ATH quarter since inception). The $900M won’t be available for exiting until at least October 1st this year. And small likelihood that this group will exit at all. Yes, $900M is not significant when compared to the mkt cap (let’s put aside the whole thing about how BTC mkt cap is inflated, for now). However, it does indicate a switch in accredited/institutional investors’ view on the crypto space – where the money comes from to push the next ATH. Also, large players are accumulating off-chain. #MircroStrategy.
BTC mining difficulty just got adjusted to its all time high with an 11.35% increase, 10x higher than that of end of 2017. This means, firstly, the security of the bitcoin network is improving significantly despite the price decrease compared to the 2017 20k ATH. Secondly, miners are profiting ever since the March capitulation, and more miners are joining the game at the current price level.
Neutral TO BULLISH
Overall market sentiment is now neutral. For the seller group sentiment, this group remains in a bull trend. As mentioned last week (when we were at the 10k level), 10k dropped below the actively trading group’s purchase price, which yielded a great R:R setup for the long side (decrease in willingness to sell, leading to a decrease in supply, which will ultimately increase price). In the coming week, we might have a similar situation soon. The level to watch out for is around 10.1k. If we drop below that level, the red star situation will likely occur, switching us to a temporary short-term bear trend (active group selling in loss). However, probability speaking, I would say the chance of the red star situation is slim, and buying the dips is the priority.
Margin & Futures Market Actions
Neutral TO BULLISH
Currently, the margin market is bearish, with low open interest. In simpler terms, most traders don’t believe BTC price will make new highs before dropping below 10k. Well, this is the textbook scenario for prior early bull run BTC price rises. When will the rise happen? When more traders put the money to the bearish game. Bull run emotional cycle: depression, disbelief, hope, optimism, belief, excitement, thrill, greed, euphoria. Take your pick of where we are at right now.
As for the CME institutional traders’ positions, not much has changed this week and the trend remains bullish. Do note CME positions are for futures, and thus acts as a leading indicator rather than a coincident indicator. In early bull runs (and when there’s still time to the future maturity), it’s also in the whales’ interest to push the price down, lowering average cost. Check out the March resemblance. Similar occurrence for the 6k to 3k drop (but less CME oriented).
Global Market Impacts
To ease the COVID impacts, the Fed is using all means to boost the economy, which means a continued rise in inflation. This will fundamentally push up the value of gold, bringing up bitcoin along the way as the main value proposition of bitcoin remains store of value rather than remittance.
The weekend gap has already been filled. Also, as mentioned many times before, I would ignore the $300 gap open on 7/25. After such a long time, the gap filling (big if here) will be more of a result of general market movements rather than the cause. Many are now aware of this opened gap, but the problem is the more people getting onboard means the less likelihood of an event happening.
Support / Resistance
Neutral to bearish
Short-term Resistance at 11.3k. Support at 10.5-10.65k.
The key level to watch out for is 10.1k. If we drop below this level, the short-term trend will likely turn bearish.
Neutral to bearish (Short-term)
wave (ii) of III likely over at this point. Wave (ii) as a zigzag. Wave (iii) in development. We are potentially done with wave 1 of (iii). Details see the chart above. An alternative short-term EW count for now is: (4) is still developing. (5) to 11.3-11.4k. Regardless, the short-term ideal accumulation zone should be similar. I would target 0.382-0.5 Fib retracement rather than the 0.618 level, given the bullish trend.
Daily RSI looks beautifully bullish. Bull trend support (40) held, and we are finding support above RSI’s MAs. Potential MA up-cross soon.
1D up-crossed from the negative side. MACD will turn positive soon with a potential price EMA up-cross.