Bitcoin (BTC) declined below $8,000 within days of testing the $9,000 mark. This goes on to show that a lot of professional traders who rode the parabolic rally cashed out near the $9,000 mark. However, just when retail bears think this is the time for further continuation of the downtrend, we might expect another rally to the upside that will end up testing the 38.2% fib retracement level from Bitcoin (BTC)’s all-time high. The daily chart shows that BTC/USD has now broken below a large ascending wedge and has also broken the parabolic uptrend. We are likely to see a lot of sideways movement before the next big move. The trend line support of the ascending wedge will not serve as resistance and is likely to stop the next bullish advance.
While we do expect the price to consolidate in its current range for now, it is possible that we might see a temporary fall below $7,000 in the near future. This would coincide with a retest of the 50 day moving average which is a very strong support. The RSI and NVT have both cooled off for now and there seems to be ample room for a rally from here onwards. While a lot of retail bears want to believe that the price is going down from here, we believe that this is not the rally that takes the price below $3,000 from current levels. That being said, as BTC/USD trades sideways for the next few days or possibly retraces further, we are likely to see the number of retail shorts pile up. This would be the final play that inflicts further pain on the bears as we see shorts get liquidated once again.
The number of shorts has declined significantly in the past two days. We are likely to see BTCUSDShorts rise again in the near future as the price of Bitcoin (BTC) rises. This becomes a challenge for market makers who cannot afford to let such a large number of retail bears win. So, they have to confuse them from time to time. This means that the obvious seldom happens in financial markets and just when everyone is expecting the price to go down; it is likely to do the opposite. Both the bulls and the bears are expecting BTC/USD to go down at this point. The bulls expect it to complete a correction so it can begin its uptrend towards the previous all-time high of $20,000. The bears expect it to bottom from here and fall below $3,000.
As we have discussed in our previous analyses, the way market makers or whales operate is that they knock out both the bulls and the bears. The ideal play here is to let the price decline enough so the bulls are comfortable longing the dips and the bears are left disgruntled because of a small correction. This will result in retail bulls buying on margin and retail bears short selling on margin. First they liquidate the bears and pump the price, and then when the long stack up, they pull the price down before the bulls have a chance to cash out. The market makers run their stops and pull the price down before the shorts have a chance to pile up. This is the only way market markets win here and they always win.