After a wild week of volatile price swings, BTC managed to hold the key support at $57.1K, closing the weekly candle at $57.3K. Bulls pushed the price higher, heading into the weekly close, and manage to liquidate a lot of short positions.
For the near term, it’s still too early to confirm a bottom as we have to see how stocks trade this week.
Long-term technicals remain bullish as BTC continues to make higher highs and higher lows. For the near term, the cryptocurrency needs to hold the recent lows at $53.3K and start making higher highs and higher lows to help confirm a bottom.
It’s important to note that Bitcoin hasn’t tested the September highs at $53K. If stocks struggle to recover this week and we see more uncertainty on the new variant of the virus, this could trigger liquidations causing BTC to retest critical support $53K and even $50K.
The market might need this week to digest the new variety of the virus. If fears are overblown, then we can expect the market to resume the risk-on trade. If uncertainty remains, this could weigh on stocks and the crypto market in the near term.
There has been a bullish divergence forming on the 4-hour chart, which is a short-term positive development. The 3-day Bollinger Band is starting to squeeze, indicating a significant move could be coming once BTC finds a bottom.
This occurred back in July and September earlier this year, which led to a significant rally higher. The bulls need to push BTC higher to reclaim $58.3K, $60K, and the 50-day MA, on a weekly closing basis to help technical momentum bullish.
With a 22% pullback from the recent all-time high of $69K, long-term holders and miners continue firmly HODL. Long liquidations and younger coins realizing losses have been the primary drivers of the pullback.
Bulls should not be concerned about a 22% drawdown because the long-term holders and miners who hold the majority of BTC supply are not selling. This strongly suggests that the pullback is rather a shakeout in the middle of a bull market.
STH SOPR has spent many days below 1.0, which confirms that younger coins have been realizing losses, turning this into a historically good opportunity to accumulate during bull markets as STH SOP testing 1.0 or lower has typically helped BTC find support and mark local bottoms.
BTC exchange reserves have been falling to new multi-year lows consistently throughout the multi-week correction. This strongly suggests investors continue to accumulate the pullbacks and withdraw BTC out of exchanges which adds to the supply shock. All exchange reserves are down 61,000 BTC since the start of November.
Near-term conditions remain cautious as we have to see how stocks trade this week. The overall trend in fundamental and on-chain remains bullish, suggesting this pullback is a shakeout in the middle of a bull market.
Cycle top indicators are still far away from previous cycle peaks, indicating a significant upside ahead for the rest of the run. It’s still possible for BTC to wick down to $53K to $50K, especially if the stocks enter a deeper correction, likely causing more liquidations. The bottom is getting closer, and once certainty returns to the market, we can expect the risk-on trade to resume, pushing both BTC and stocks higher.