Bitcoin – the unwind begins
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Zooming out (3-day/weekly) on the charts of some of the major exchanges today shows flattening / decline in volume, particularly with respect to the prior two major legs up in price (end-March to end-May; mid-July to end-August) – while the price is going up the volume is changing direction. Note: for this analysis I can't take seriously the charts from either new exchanges (customer uptake skews things) or exchanges that have suffered major setbacks during the last year (Chinese exchanges with their huge drop in volume in 2016 due to heat from regulators calling an end to wash trades; Bitfinex with the major hack a year ago and subsequent drop off and re-uptake of customers). To get a good idea of demand one has to pick the exchanges that have run as smoothly as possible throughout the period in question, such Kraken and Bitstamp. As this decline in volume is witnessed the weekly MAC-D indicators of the exchanges shows that unless a significantly heavy week of buying materialises now, a move into red territory will happen on October 2. The last time MAC-D was in the red was in March, with no significant time spent in the red since this time in 2016. In brief a correction here is well due.
The mid-term view backs up the view that buying pressure is significantly weakening – the daily charts show that the bounce started on September 15, while creating a significant green volume bar, has not continued with nearly as much vigour as the bounce that began on July 17. Indeed the volume of 15 September was likely caused by shorts closing, not long-term buying, a factor that will act to lessen any possible “short squeeze” if the price does go back up.
Something that some traders watch for to assess bullish pressure is a strong start to the beginning of the week, the logic being that deposits made at the end of the prior week can take several days to be credited, leading to a build up that creates strength early in the week. So far, the buying pressure has been very lacklustre this Monday September 25. This is an inexact way to analyse the market to say the least, but it is nevertheless one thing to keep an eye on, among many other factors.
Finally, zooming back out, the most important thing to consider is the current risk/reward of taking a long-term trade. Reading the analysis of other traders on tradingview one can see various bullish views. To keep realistic and within a reasonable long-term view (ie months / years rather than decades) we have to discard the projections for tens of thousands of dollars per Bitcoin upwards. So (ignoring short views) we are left with long views from traders who project possible new highs of somewhere between $5,000 and $8,000. The problem here is RISK/REWARD.
For anyone who has been investing or trading in Bitcoin for significant time (1 year plus) the prospect of going from $3,750 to $6,000 is nothing special! Don't get me wrong – for any normal investment it is a great return, but for the long-time Bitcoiners / crypto-enthusiasts (who also hold a much larger portion of the total outstanding Bitcoins in comparison with the vast majority of other Bitcoiners) it is nothing. They are used to returns in the 1000% + range. What does this mean? That there is fast-growing pressure on those long-term Bitcoiners to take profit. The risk of holding on longer for meagre returns compared with what they have already achieved is far too great, when the speed with which a crash can occur is well-known to them. They know only too well what the last bear market felt like.
To balance this vast amounts of new bullish capital are required to make up for the disproportionate amount of wealth held by the few long-term players. But new players with half a brain can see that they have missed out on an 800% rise since this time last year, and now have the prospect (according to the most reputable traders here) of at best a 100% return at an extremely risky possible end-of-trend moment with more downside beckoning.
The mid-term view backs up the view that buying pressure is significantly weakening – the daily charts show that the bounce started on September 15, while creating a significant green volume bar, has not continued with nearly as much vigour as the bounce that began on July 17. Indeed the volume of 15 September was likely caused by shorts closing, not long-term buying, a factor that will act to lessen any possible “short squeeze” if the price does go back up.
Something that some traders watch for to assess bullish pressure is a strong start to the beginning of the week, the logic being that deposits made at the end of the prior week can take several days to be credited, leading to a build up that creates strength early in the week. So far, the buying pressure has been very lacklustre this Monday September 25. This is an inexact way to analyse the market to say the least, but it is nevertheless one thing to keep an eye on, among many other factors.
Finally, zooming back out, the most important thing to consider is the current risk/reward of taking a long-term trade. Reading the analysis of other traders on tradingview one can see various bullish views. To keep realistic and within a reasonable long-term view (ie months / years rather than decades) we have to discard the projections for tens of thousands of dollars per Bitcoin upwards. So (ignoring short views) we are left with long views from traders who project possible new highs of somewhere between $5,000 and $8,000. The problem here is RISK/REWARD.
For anyone who has been investing or trading in Bitcoin for significant time (1 year plus) the prospect of going from $3,750 to $6,000 is nothing special! Don't get me wrong – for any normal investment it is a great return, but for the long-time Bitcoiners / crypto-enthusiasts (who also hold a much larger portion of the total outstanding Bitcoins in comparison with the vast majority of other Bitcoiners) it is nothing. They are used to returns in the 1000% + range. What does this mean? That there is fast-growing pressure on those long-term Bitcoiners to take profit. The risk of holding on longer for meagre returns compared with what they have already achieved is far too great, when the speed with which a crash can occur is well-known to them. They know only too well what the last bear market felt like.
To balance this vast amounts of new bullish capital are required to make up for the disproportionate amount of wealth held by the few long-term players. But new players with half a brain can see that they have missed out on an 800% rise since this time last year, and now have the prospect (according to the most reputable traders here) of at best a 100% return at an extremely risky possible end-of-trend moment with more downside beckoning.
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Opened shorts in the 3320-3330 rangeNota
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Closed short with 0.25% loss on account. Looks like the bulls will take this a bit higher but I'm not going long, rather looking for new shorts in a few days time.Nota
Please see continued SHORT analysis here:
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