Uncertainty after an episode of liquidity crisis - technical analysis from December 6, 2021

Bitcoin experienced a major correction this weekend amid a liquidity crunch Friday night and Saturday.We saw another big wave of cascadingliquidations that licked open interest from the market and dropped the main indicators for cryptocurrency derivatives to baseline values. Such a large range of movement was largely due to timing (low liquidity on Friday evening) and the size of active leverage (leverage used in derivatives markets).

This took a lot of people by surprise, including me.At this point, I consider my short-term bullish thesis on BTC/USD to be refuted; it is entirely appropriate to change your perspective when the market objectively provides new information. I consider the loss at $53K significant, and the depth of the downward momentum surprised me.

And although I still believe that inMacro outlook, this is a bull market, and that much higher target levels are still in play, it would be inadvertent to shout at every decline that this is it, the bottom has been reached. In my opinion, the market can clearly go lower. I suppose to look for more clarity when the dust settles.

Butnothingnone of this matters much if youinvestor with a planning horizon of five or more years. Continue to buy little by little, taking advantage of the opportunities presented by the market. If you are actively trading or risking money that matters to your life, then yes, current events are definitely worth paying attention to.

In terms of fundamentals,Perhaps the best indicator of the impending dump was the large deposits of BTC to exchange addresses from the side of the whales, which I did not follow or pay attention to. Whales need coins on exchanges to sell them.

This chart could help as well. https://t.co/FkSkq7Ls8H pic.twitter.com/HXeR1cWuSU

— Ki Young Ju 주기영 (@ki_young_ju) December 6, 2021

Obviously, it is worth paying more attention to this indicator in the future.

Monthly schedule

Chart executed in TradingView

Didn't expect to have to discuss again so soonthe middle line of this channel as support, but here we are again. It is still only the first days of the month, so in theory it is categorically early to return to the monthly chart, but the very fact that the price again interacts with the level of the middle of the channel is remarkable. Until now, whenever price breaks it up or down, it will eventually hit the corresponding channel border. I still consider this a likely scenario, however anything can happen.

Weekly schedule

Chart executed in TradingView

The weekly chart for today I find the mostinformative, because it shows clear levels to which special attention should be paid. As you can see, Bitcoin is trading at the 50-week MA, which has not broken down since the COVID-2020 crash in March. The price is also trading slightly above the descending blue line, which signaled earlier breakout to new record highs.

Interestingly, two weeks ago the candle was foundsupport was almost exactly at $53 thousand (a little higher in fact, which logically could be the “front run” of this level, as we discussed earlier), and last week it found support at $42 thousand, that is, at the next important level. I didn't think we'd end up with him again.

Market structure starting at lows of ~$28k.set a few months ago remains decidedly bullish. The price has formed a series of large lows and large highs, and so far the current decline has not disrupted this technical structure. If you take into account the “wicks” of the candles (and I do), then everything above $39.6 thousand is not a lower minimum.

This is perhaps the most important factor that forms the technical structure of a market trend.

Daily chart

Chart executed in TradingView

Deviation from 50MA resistance several times,the market is now trading near the perceived support in the 200MA area. It should be noted the huge trading volume on the Saturday candle, the largest in a very long time. Now the price is at the support, which is the area of ​​demand left before the last "pump". The support has already been flashed through, so it's not that strong.

Chart executed in TradingView

The price is trading well below the lower borderBollinger bands, which means that we can expect at least some local rebound or consolidation with the price returning to the lower band and to the middle line of the indicator. The last deviation from the resistance of the central line was already repeated and very unsightly, accompanied by the expansion of the bands downward. This allows at least one more decrease to be expected after the dust from this has settled somewhat. It is difficult to judge this when the volatility is so great.

Chart executed in TradingView

RSI on the daily timeframestillhas not reached the “oversold” zone.I thought that at current prices it should already be there, but the RSI continues to bounce just short of it. It seems like it's time to call it a day, so a lower daily close would, I think, likely take us into an "oversold" position on the daily RSI. Thisnot equivalentformation of the bottom, but will serve as a beginning formovement of the indicator to the opposite pole - “overbought”. But I want to say that the RSI can be “oversold” quite strongly, and the price can go much lower. If you look at these reports regularly, you can probably guess that I will be watching for the formation of a bullish divergence with the RSI to signal the formation of a bottom.

As I said last week, all of our previously outlined bullish divergences have been canceled by hidden bearish divergences, signaling the likelihood of further declines.

4-hour chart

Chart executed in TradingView

Here we have a clear resistance~$49.8 thousand, formed after the fall. Taking it could be the first signal of a potential bottom forming. This also coincides with the 50% retracement from the bottom of the decline. I say this very often: after a big drop, you can expect a sharp 50% rebound due to pre-placed orders and the reaction of the market as a whole. Exactly the same thing happened this time. So far, the market has not shown clear signs of a reversal, just a normal rebound after a strong fall.

Chart executed in TradingView

A close below ~$46.5K on the 4-hour chart will result in another potential bullish divergence forming.

Bottom line. I don't like the $53k level.was not held and that the price went so deep. My short-term expectations range from neutral to bearish, and I wouldn't be surprised if the bottom hasn't been reached yet. For now, we're actually inside a trading range between $42K and $53K, and a break through that in either direction could give us more insight as well.

 

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