Bitcoin (BTCUSD) (1-day/6-hour comparison)
This week brings us some interesting price action with Bitcoin and Ethereum as they struggle to hold key levels as holders watch their bull market gains evaporate. As noted in the December 20th report, we saw the drop to the key orange zone ($40k) which is the line in the sand for bulls. It’s this zone specifically that plays a pivotal role in the short term and plays a big part in the overall market trend of the past year. Fortunately, we saw a swift buy back and what appears to be momentum building for the upside in the hours after. Bears know they’re in trouble and that’s clear in the amount of shorts closing.
As we zoom in on the 4-hour chart, we can see a bullish Swing Failure Pattern, or “SFP” which shows price being rejected from the low of $39,600. Buyers wasted no time in pushing back above local support to ensure candle closes remain higher. In addition, we see below that the infamous FTX Bitcoin whale(s) had almost all of their resting bids filled, which is monumental for reversal. As liquidity is magnetic, this raises probability greatly that reversal is in process.
While not out of the woods yet, traders who are looking for high risk:reward setups can clearly see the opportunity for buying or longing, and that should lure in potentially massive buy volume to push upwards and reverse the trend.
Ethereum (ETHUSD) (3-day)
Ethereum has been consistently weaker than Bitcoin and continues to display that weakness at every move. One could conclude that this is a result of its massive DeFi-driven run and was simply too overheated to even maintain alignment with Bitcoin’s contraction.
Once the market stabilizes and forms a bottom, it’s safe to conclude that strength will return to Ethereum and will get at very least a sustained relief rally.
Fundamentals & Correlations (Weekly)
There’s nothing new to report on Bitcoin Dominance and the US Dollar Currency Index. Both seem relatively unchanged and are having very little effect on price action and trends. One thing to continue noting is Bitcoin’s dominance sitting at support, opening the opportunity for it to show strength and suck volume from the broader market as it takes the stage. Regardless, this would inject some strength into the market as a whole once it cools off and bulls would once again be in control.