In the past 3 days, the price of Bitcoin has been rising little by little.
January 24 - up 3.2%
January 25 - up 1.3%
January 26 - up 2.0%
As the strongest paired cryptocurrency, the rise in Bitcoin's price has been raising the rest of the crypto market.
Yay, a little relief for everyone.
And even better for those who bought the dip, such as the President of El Salvador, Nayib Bukele.
However, is this the bottom? Or is an even bigger dip just around the corner?
That's hard to say.
There were several bull traps, most recently on January 12th and December 21st.
Both times, the daily candle finally got up above the 7 day simple moving average, but eventually, the bulls failed to bring upward momentum for Bitcoin.
Is today any different?
To be honest, it's too early to tell.
There hasn't been enough of a confirmation for me to change my mind that Bitcoin's price momentum has reversed.
Not financial advice, but just my financial opinion... we're MORE likely in another BULL TRAP, than not. Here's why:
The past 3 days may have ended positive for Bitcoin, but the relief has been pretty weak. There hasn't been a blow off top, which tells me that investors are still unsure and still not confident in the market just yet.
What did I say at the beginning of the article?
I said that the "price of Bitcoin has been rising little by little".
Those are the key words: little by little.
That means that this reversal has just been that: WEAK.
Investors are waiting for ONE major thing, and one smaller thing to happen to make their decision:
- What Jerome Powell has to say about inflation tomorrow.
- Bitcoin expiries this week.
Jerome Powell may be the most powerful man in the world tomorrow, because whatever he says during tomorrow's Fed meeting about inflation and tapering interest rates will affect everyone's portfolios... in traditional markets and in the crypto markets.
Rate hikes are already expected, but if more rate hikes are proposed than what was expected, then EVERYTHING, including Bitcoin may tumble.
Worst case scenario, Bitcoin may tumble down to... drum roll please... $20,000!!!
This is looking at the weekly chart, and as you can see... the 200 day simple moving average is at $20,000.
Definitely, get ready to buy the dip then. Better yet, set some limit orders.
Secondly, we have a few expiries this week. As usual, most of that volume occurs on Fridays.
According to Coinglass.com, the strike prices with the most volume are: 707.5 BTC betting on the price of Bitcoin to be $35k or below and 287.88 BTC betting on the price of Bitcoin to be $38k or above by Friday, January 28.
As you can see, more people are bearish on Bitcoin by this Friday.
Typically, if the strike price isn't met by that date, and there is a lot of volume for that price, then a lot of BTC will be sold off, which can drive the price of BTC lower.
Then again, if the demand for Bitcoin outstrips the volume of BTC being sold off, then this risk will not make much a difference.
I'm just waiting for that blow off top - that's my signal for a reversal.
What confirmation signal are you waiting for? I'd love to hear it. Share yours down below, and happy trading.