Bitcoin (BTC): Will This Time Be Different?

Bitcoin (BTC) has had one of its most brutal weeks in a long time. We have now seen a series of red weeks for BTC/USD but now it is at a critical juncture. The price has just declined down to the 100 Week EMA which takes us back to the same time of the year last year. Bitcoin (BTC) did the exact same thing on Nov 12, 2018 as it crashed down to the 100 Week EMA. However, back then it ended up closing below that level which was then followed by an even brutal decline leading to the December, 2018 low. At this point, we are in a similar situation as the price has two more days to close the week but it is not clear yet whether BTC/USD will decline below the 100 EMA or not. 

Now that we have analyzed the similarities between the two, let us delve into the differences to assess whether the same thing could happen again. Before we do that, let us not accept that BTC/USD is very likely to fall down to the 200 Week EMA whether it happens now or later. It happened in December, 2018 and it is very likely that it might happen again. Bitcoin (BTC) had already declined below the 61.8% fib retracement level when it tested the 100 Week EMA in November last year. However, this time it has declined down to the 61.8% and we have yet to see how it will play out. Another difference is that back then the price was already trading below the 21 Month EMA. This time, the price has just tested the 21 Month EMA but we have not seen a decline below it just yet.

The 4H chart for Bitcoin dominance (BTC.D) shows another interesting piece of the puzzle. The last time Bitcoin dominance (BTC.D) ran into the 200 moving average, we saw a short term bullish period follow afterwards when the uptrend broke. This time we will have to wait for confirmation to see if the same can happen again but even if the recent correction is not complete yet it is clear that we do not have much room for further downside at this point. 

There is a very strong probability that the price will rise further before it declines again. Around 550 million Bitcoin shorts have been liquidated since last Friday. This stop hunt is unlikely to continue much lower. The market makers and whales might try to get the bullish hopes up once more before the next downtrend. This is how it has been happening throughout this bear market and I don’t expect it to change this time. The vast majority of retail bulls are very scared at the moment. Even though there is extreme fear in the market according to the Fear and Greed Index, investors are still reluctant to buy the dip. All of these signs and developments indicate that the market might see a short term trend reversal.