Bitcoin Having a Blast, Trend to Stay Up

The technical indicators are printing favorable signals and the future Open Interest (OI) data suggests shorts and bearish bets are being squeezed out

14:44 11 February 2022

 

Bitcoin and the whole crypto pack were in a spot of bother, just a couple of weeks ago. On January 22, the key $40000 support collapsed, pushing the price down to multi-month lows. Looking to take advantage, the bears with all their might tried in vain to drive the price down through the $30000 level. Shaken but not stirred, the bulls channeled their hodl-ing spirit and held firm. Eventually, the selling pressure waned, bringing relief to crypto advocates and technical analysts who were badly hoping for the market to reset and turn around. Having suffered the brute force of the crypto rout, they took solace from the fact that the long-term bullish structure was intact and hoping for a prompt recovery.

 

It appears, the tide has turned. Things are looking up again. The technical indicators are printing favorable signals and the futures Open Interest (OI) data suggests shorts and bearish bets are being squeezed out of the market, leading to a massive surge in price.

 

Bitcoin Bulls Rusty, but may Get in on the Act Soon

Early this week, Bitcoin took off on a minor rally which saw it climb up and over the psychologically key $40k level, blowing over the clouds of uncertainty and pessimism that hung over the market for nearly 15 weeks. Bitcoin bulls put on a spirited display to send the price up to a weekly high of $45500 and are now guarding the key foothold at the $43000 mark despite the bears succeeding in pushing it down to $42800 once. Having overcome the stubborn $40k resistance level after a long time, the bulls are now trying to flip that zone into support and make it a strong foothold for them.

 

All those bulls waiting on the sidelines are gearing up to participate in the upcoming rally, as a fresh wave of optimism returns to the market. Some are still a touch uncertain as to whether this sharp bounce in Bitcoin price will translate into something big, while some are highly optimistic Bitcoin will pick up from where it left off. Remember Bitcoin has unfinished business to take care of: the price petered out after coming so close to surmounting the $70000 barrier.

 

It remains to be seen whether it surges up to scale that barrier, but several indicators and signals coming from the market are pointing at a bullish bias. Let's look at a couple of them below.

 

Price Action Shows the Breakout was Legitimate

Bitcoin snapped out of its bearish phase, much to the surprise of all those critics and naysayers who had prognosticated much worse things to fall out from the crypto rout. The on-chain data analytics provider, Glassnode suggests there was no real data behind all these preposterous and baseless claims calling for Bitcoin to plunge to lower levels.

 

Putting to bed all concerns over Bitcoin value dwindling to less than $10000, the price broke out of its range giving bulls a fresh lease of hope. Some pundits call it a short squeeze not a breakout. But there are strong reasons to believe the price action was indeed a legitimate breakout. For one, the shorts were not building up; put simply, bears were not willing to expose themselves to bets on lower prices. And that's a clear sign of seller's exhaustion setting in. They were not positive about driving down the price to lower levels and didn't want to take a chance until they could figure which way the price would go. The bears conceding defeat already, the short liquidation (that we got to see last week) was rather insignificant, without any characteristic whipsaw patterns. Furthermore, the chart of futures open interest daily exchange released by Glassnode points at another interesting phenomenon showing how this price decline was different from the crypto routs of the past. As is made clear by the chart, every time a major price decline occurred in the past, the future OI dropped significantly. But it was not to be this time around.

 

Moreover, BTC has coiled back up in style and is now starting to venture into short liquidation zones. What this means is that as Bitcoin continues to move higher and higher, more liquidation or squeezing of shorts might happen which in turn may trigger more short rallies paving way for another bull run.

 

Technical Confirm Reversal of Short-Term Trend

The much-needed rebound happened. That's great. The Relative Strength Indicator (RSI) flashed a buy signal confirming the bullish bias and so did the Moving Average Convergence/ Divergence (MACD).

 

But a shot at beating the existing highs looks out of reach now, considering that the price has still not been able to get on top of the 50-day Exponential Moving Average (EMA) and 200-day EMA support levels. More buyers will get on board with a renewed sense of optimism if BTC continues to make larger strides towards conquering these crucial EMA levels along with upcoming resistance levels.

 

BTC is on pace to take out the next few resistances at $45000, $51000, and $53000 respectively but another swift move downside back to mid-$30000 levels cannot be ruled out as widespread profit booking can be seen at these levels.

 

Traders Back in the Game

Bitcoin's bounce from sub-$40k levels encouraged a majority of traders to shake off their negative bias and partake in the rally, defining a clear shift in sentiment and momentum. And the fear and greed index, which tracks market sentiment, nods in agreement too. Just a few weeks ago, the index was at its lowest, but it made slow and steady gains as the bearish trend wore off. At the time of writing, BTC is changing hands for $44250, up over 12% in the last 7 trading days. And for the first time in well over three months the index is clear of the fear zone at around 54, but only just. 

 

The bias has swung from negative to positive, for sure. BTC seeks to establish a fresh base in the tight range it is operating in. And that bodes well for traders. As BTC interacts with the key support and resistance zones, few good opportunities to trade may come up so be on the watch and snare one when it presents itself. If you want to join in on the act and pocket a good few points here and there trading in this market,bitcoin-buyer-app.com/tr is your best bet.

 

Bear in mind that the conditions are still not ideal for BTC to post a trending move up, so don't get carried away and double down on your bets. For a clear upward trend to emerge, the price will need some sort of a momentum going for it. The lack of positive news regarding Bitcoin adoption or regulation is already proving to be a bit of a dampener so do not risk taking a huge position.

 

Until a clear trend emerges, it is best to trade with just the right position size that matches with the profits you're after and the risk you're willing to stomach.