Bitcoin Update: Bears are Exhausted
In October 2018, Bitcoin recorded a new monthly low close price for the year of $6,304.18 on Coinbase. For many traders, this was a cause of concern. The new low may indicate that bears are still in control of the market. This revitalized and renewed calls for a break of $6,000 support. On social media, countless posts show how the market will plummet to $4,000.
While these people promoting fear, uncertainty, and doubt (FUD), we looked at the charts in search for more evidence to support the FUD. What we found was the exact opposite. In this article, we show why bears are exhausted.
The Inverted Weekly Chart
Not many retail investors know this, but you can invert charts on Tradingview to get a fresh perspective. All you have to do is to type “1-ticker”. For Bitcoin, that’s “1-BTCUSD”.
Looking at the inverted weekly chart, we had a very good view of the bear perspective. What we saw was a market that sharply bounced after a steep decline. The market tried to keep the rally going, but it appears to run out of steam. In the process, it created a rising wedge which is a reversal structure.
Rising wedge breakout in inverted BTC chart
Just recently, the market broke down of the rising wedge. It attempted to reclaim the support but it was rejected. The price action tells us that bulls have flipped the support into resistance. We’ll know for sure when the weekly candle closes. Nevertheless, the inverted Bitcoin chart is showing that bears are losing momentum.
Another chart that is not popular among retail investors is the BTC Shorts (BTCUSDSHORTS). This chart is a crude indicator of bearish sentiment in the market. It reflects the total number of margined short positions measured in Bitcoin. For example, the BTC Shorts hit its 2018 high of 40,719.1018 on April 12, 2018.
Those traders who leveraged their short positions did so because they thought the market was extremely bearish. The BTC short market reached around 40,000 levels on August 22, September 07, and September 19. In all of these occasions, short sellers got wrecked. Bitcoin held on the support area of $5,800 – $6,000. More importantly, Bitcoin rallied every single time after holding on to the support. This forced many short sellers to close their positions at a loss.
BTC price action after record highs on short positions
After numerous attempts to break Bitcoin, BTC shorts collapsed. It recently breached multiple support levels that kept its uptrend alive. More importantly, it reversed its trend after breaking out from a triple top pattern.
This is an indication that bears are exhausted. It appears that they have given up hope on a break below $6,000 support. This narrative supports our first point that bears tried to keep the downtrend alive but now, they are running out of steam.
The Daily Chart
On the 10th birthday of Bitcoin (October 31, 2018), bears had all the opportunity to exert their dominance. All they had to do was keep the market under $6,200. Doing so would have taken BTC/USD back inside the triangle and invalidated the heavy volume breakout on October 15. Unfortunately, bears showed very little fight. Sensing weakness, bulls took advantage of the situation.
As a result, bulls flipped the triangle resistance into support. Then, Bitcoin bounced.
Daily chart of BTCUSD
Interestingly, volume on that day was significantly lower than the daily average. This tells us that the bounce was not borne out of bullish aggression. On the contrary, it was the consequence of almost non-existent bearish resistance. This plays well with our first two points that bears are almost ready to drop.
The weekly inverted BTCUSDSHORTS and BTC/USD daily charts reveal that bears are limping. Once bulls recognize this, we can expect Bitcoin to finally end its 2018 bear market.
Featured image courtesy of Shutterstock.