Bitcoin (BTC) seems to have made a recovery the last few days but since the beginning of this month, it has been trading in a big rising wedge that extends all the way to Bitcoin (BTC)âs downtrend resistance. The above daily chart for BTC/USD shows that the price has room to rally till $7,500 as mentioned in one of our previous analyses but any positive momentum at this stage will most likely be short lived as Bitcoin (BTC) risks falling back to the $5,800 support once it break out of the rising wedge.
Volume flow indicator on the above chart shows Bitcoin (BTC) trading in another wedge that it is bound to break out of before the end of September. IFT RSI conditions for Bitcoin (BTC) also suggests that the price has reached a top for now and is likely to break out of the rising wedge in the weeks ahead. Volume for Bitcoin (BTC) has been on a continuous decline and there is no hope of any positive recovery. Expectations of a Bitcoin ETF had recently pumped some life into the market but just like support turned resistances in technical analysis, this ETF has now become a possible resistance for Bitcoin (BTC), which means if the SEC rejects all Bitcoin (BTC) ETF and issues a negative statement, all hell is going to break loose for Bitcoin (BTC).
Every time Bitcoin (BTC) retests the $5,800 resistance, hopes of a recovery fade away. This is because in technical analysis, the more the price of an asset tests a particular support; the more likely it is to eventually break it. The $5,800 support displayed on the above 4H chart for BTC/USD is what has kept most of Bitcoin (BTC) investors hopeful about a reversal from current levels. However, if it is broken, there is a high likelihood that Bitcoin (BTC) will enter another correction that could last another six months or longer. For a market to turnaround, there has to be an absolute sentiment of pessimism and dejection.
So far, we have not seen that. There are still plenty of people calling for Bitcoin (BTC) going to the moon. Some of those analyses calling for a new ATH by end of the year are very plausible but the overall sentiment is still very positive. For a correction to be complete and sell pressure to go away, positive sentiment has to be completely destroyed to the point that even popular industry figures like Tom Lee and Anthony Pompliano back away from their previous predictions. So far, we have seen hints of that but they are still very confident.
Bitcoin (BTC) shorts have also lost confidence as can be seen on the chart above. The number of shorts has declined steadily over the past few days and the trend seems to be changing. The bears have become very silent all of a sudden as the market has shown some temporary signs of a recovery. This is a strong indication that for retail traders, the game of shorting Bitcoin (BTC) is over for now but that does not mean the big boys are done with their plays. It just means that the sell pressure is fading for now. However, BTC Shorts may still break the previous ATH in the weeks ahead as the buy pressure is extremely low as well.
The above chart for BTCUSDLongs shows that the number of Bitcoin Longs is still on the decline. It is a good sign that BTCUSDLongs is trading in a falling wedge which means the trend might eventually reverse by October but so far, the buyers are scared as they fear the ETF situation has a higher likelihood of going south rather than north at this point.