Even though my name is BTC_Jay and I personally believe that Bitcoin will go to 100,000$ at some point in the future, this doesn’t mean that I’m deterministic in that vision.
As a trader, price doesn’t really matter all that much. Sure, it feels nice if the underlying asset which you are trading is going up in value if you appear to also own it. But, we have to be at least prepared for multiple different outcomes, scenario’s, and more specifically, we need to be aware much in advance of what the main levels are which we need to act on.
In this write up, I’ll present to you a Bitcoin bear case. However, even if this bearish scenario plays out, I am and remain macro bullish on Bitcoin itself. This does NOT however mean that I am macro bullish on the totally of cryptocurrencies. Many altcoins won’t survive, some of them printed out of thin air, having an infinite supply.
Let’s not forget that with Bitcoin, we have one big certainty. 21 million Bitcoin, and not a single Bitcoin more, will eventually come into existence.
As an investor, I’m personally only interested in things that give me the guarantee of scarcity.
With that being said, let’s take a look at the monthly time frame for the Bitcoin chart:
On the monthly timeframe for Bitcoin, I drew Fibonacci retracement fibs from $1,163.00 (2013 bull market high) to $152.40 (2015 bear market bottom). This move from November 2013 to January 2015 gives us two very important levels.
The 1.618 target at $4,083.41
The 2.618 target at $31,161.45
Both of these levels have proven their importance ever since.
The 1.618 target at $4,083.41 was the level which we broke through in September 2017, consolidated at from November 2018 to April 2019 and which we ALMOST EXACTLY retested swiftly during the Covid crash.
The 2.618 target at $31,161.45 was the level which we broke through in January 2021 and held as support during the summer of 2021.
As of right now, let me illustrate the bear case by pointing you to two simple facts.
a. We have clearly lost the monthly support at the 2.618 fib ($31,161.45) and have traded below this level for well over half a year. That signifies weakness.
b. On the chart I have three EMA’s. Blue line = 10 EMA / yellow line = 20 EMA and red line = 50 EMA.
Unless something drastically turns around for Bitcoin in the last 9 days of 2022 (which is possible, but not likely), we are about to have the first ever death cross where the 10 EMA drops below the 50 EMA on the MONTHLY timeframe.
Why is this important? Well let’s take a look at what happened for a big index like the SPY after this particular death cross signal (10 below 50 EMA - monthly timeframe):
On this chart, we see the monthly timeframe for the SPY.
December 2001: 10 below 50 ema à 30% + down
October 2008: 10 below 50 ema à the market crashes violently during the month where it flashes the signal and ultimately moves down 40% + from this monthly signal
So, with this knowledge in mind, what could be a plausible bearish scenario for Bitcoin?
I would say:
- Create monthly 10/50 ema death cross
- Move down to around the low 10k area
- Bounce for a bearish retest around the 2017 all time high
- Move down to covid lows for a long period of accumulation (at that point, nobody will buy anymore and we can truly see a massive reversal in the market).
Does this scenario have to play out? Absolutely not.
Should you prepare for this scenario. Absolutely
How do you prepare for this scenario, well by paying attention to the chart and the signal as shared in this writeup, but most of all: by joining Titan trading!
Much love
Jay
