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Bitcoin - Bollinger Bands
Bollinger Bands measure volatility in Bitcoin’s price action and can give an idea as to when a move may be beginning or when a move may be nearing its end.
That is because the lower BBands can act as support and the upper BBands can act as resistance.
Highlighted above are the instances where BTC rejects at the upper BBand resistance and dips afterwards.
It is worth mentioning that these rejections are not picture-perfect at the upper BBands.
In fact, price tends to overextend and deviate beyond the upper BBAnd before slinking back into the BBand area.
Of course, these upside deviations are market cycle agnostic so they can occur in Bull or Bear Markets, though the price ramifications tend to differ based on where BTC is in the cycle.
So generally, when BTC tends to deviate beyond the upper BBAnd, it is usually a signal that the current move is getting a little bit too exuberant.
Could BTC rally a bit more beyond the upper BBand?
Yes, markets can go up longer than most could think because of how exuberance in uptrends tends to get out of control.
But generally, deviation beyond the upper BBand tends to set up at least some kind of dip.
Right now, BTC is once again upside deviating beyond the upper BBand, but only marginally.
So there is an element of over exuberance, especially since BTC has reached a key resistance area:
And that level is the Monthly resistance of ~$23400 (blue).
Generally, BTC is inside the ~19900-$23400 range so intra-range consolidation anywhere inside this range is fair game.
And in fact, a new Lower High may be forming around this ~$23400 Monthly resistance:
BTC needs to Monthly Close above ~$23400 to confirm a breakout on the Monthly from this blue-blue range.
But a lot of resistance awaits just above:
Because the orange 200-week MA and blue 50-week EMA lie just above at around ~$25000.
And of course the green 21-week EMA lies below at around the ~$20000 region, which approximately confluent with the current Monthly ~$20000 support:
So we’re seeing that the Bull Market EMAs are adding confluence to these two Monthly levels.
- ~$23400 resistance (Monthly Range High, approx confluent with 200-week MA and 50-week EMA
- ~$20000 support (Monthly Range Low, approx. confluent with the 21-week EMA)
Inverse Head & Shoulders?
So if the current ~$23400 highs are acting as resistance, with lots of confluent resistance hovering just above this level, and with the green 21-week EMA waiting below at the ~$20000 level which is the Monthly Range Low…
Then a dip into the ~$20000 could be the next logical dipping point.
And such a turn of price events could see BTC form an inverse Head and Shoulders, with the neckline (i.e. newly formed red Lower High trendline) acting as the breakout point from the formation.
Obviously, a Monthly Close above ~$23400 would invalidate this idea; generally reclaiming ~$23400 as support would enable further upside for BTC.
Macro Downtrend - It Gets Easier With Time
It’s important to note that the Macro Downtrend that will ultimately confirm a new Bull Market has not been reached (black diagonal).
And whatever happens in the meantime, for example if the inverse Head and Shoulders plays out, will serve as a means to an end.
Whatever occurs for price for BTC in the coming several weeks will be an effort to build towards challenging this Macro Downtrend.
We are around 425 days before the Halving and history suggests that Macro Downtrend breakouts occur some 366-397 days prior to the Halving.
So that highlights the possibility for a March or April 2023 breakout.
In that case, BTC needs to somehow “waste time” whether via dipping or consolidation until the Macro Downtrend becomes more accessible for a breakout.
Because the Macro Downtrend is slanting, meaning that it will be easier to break the trendline with each passing month because the trendline will represent lower and lower prices as time goes on:
- Macro Downtrend January Price: ~$28100
- Macro Downtrend February Price: ~$26500
- Macro Downtrend March Price: ~$24600
- Macro Downtrend April Price: ~$23400
So in a way, consolidation now or dipping will facilitate an easier Macro Downtrend breakout later.
Bitcoin Is Still Undervalued
Whether BTC dips or consolidates isn’t too important to me personally because according to data science metrics - BTC is still undervalued.
BTC has been developing an Accumulation Range below the 2-year MA; anything below this 2YMA has historically figured as an area offering outsized ROI on long-term BTC investments.
Technically, the 2YMA breakout point for BTC to exit this Accumulate Area and outsized ROI region is ~$37000:
So according to the 2YMA metric, anything below ~$37000 is still bargain-buyer territory.
And what’s interesting about BTC’s current price predicament is that it is currently up +50% from the ~$15500 lows but +60% away from the ~$37000 2YMA breakout point:
This interesting observation showcases that BTC is closer to the bottom of this Accumulation Range, rather than the top of it.
Another way of looking at it is that BTC is almost in the very middle of the Accumulation Range forming below the ~$37000 2YMA breakout point.
As a long-term BTC investor, I’d interested to be accumulating nearer the bottom of this Accumulation Range and to me - even the current price isn’t bad because my view is to hold for around a year after the Halving, when BTC gets close to its Bull Market top which may be somewhere around the red 2YMAx5, which at this moment sits just above ~$100,000.
So a potential dip in the short-term doesn’t change my long-term stance on my BTC investing, if anything it feeds into it and my macro dollar-cost averaging strategy.
Thank you for reading.
P.S.