Bitcoin Bollinger bands, NVT show signs of weakening price
מעודכן
Introduction
Bitcoin is in a very confusing time right now. There are lots of bullish sentiment happening with bitcoin but technically it is looking like the bullishness is beginning to fade and the price action is beginning to look bearish. Whether this is the first sell off or bear trap and price resumes higher in a macro trend remains to be seen. This idea will be focusing on the monthly and weekly bollinger bands and the NVT, with a couple of extra indicators.
Bollinger Band Analysis
Bollinger bands can be great tools at various stages of the market cycle, especially when combined with other indicators to verify support and resistance. They can also cut you deep when the bollinger bands fail as you think they may act as support and resistance. Once interesting way I have tinkered with the bollinger bands over time is to compare what is going on with the weekly and monthly when it comes to the upper and lower limits. During large upside impulses you will see the weekly upper limit completely above the monthly upper limit. Not shown here, but during these impulses ups you can even see the daily bollinger band complete outside the monthly BB at times. When that happens the times are heady but the hangover will be severe.
One sign the party is over is the weekly Bollinger band has completely moved back within the monthly bollinger band. The chart below will show that happened this week.
The last two times the weekly bollinger band moved into the monthly bb bitcoin was in a uptrend that ended up being a bull trap and the next move was over 50% to the lower limit of the monthly bollinger band before a serious bounce. Right now that would but us at about 24k.
NVT and Hash Ribbon Analysis
One thing probably not on most people's radar is the NVT, in particular because most people don't use this color coded version by aamonkey. I have been looking at this on the daily and weekly timeframes to help clear up some signals and right now the NVT is acting exactly like it did last bear market's descending triangle. After a massive sell off the NVT goes green and then price rallies and the top occurs around when the NVT goes red on the daily. This doesn't work for people looking to snipe trades but does let us know broadly what is going on.
The weekly NVT trend is likewise similar and something I pointed out when Bitcoin was topping. When the NVT goes above the red limit it signals the end of a bull market and severe retracements. It is only when the NVT finally passes into the green bands that price begins its recovery and never returns to those price levels. The main weakness of this analysis is we have limited history.
Many bitcoin investors look to the hash ribbon and its signals to buy and sell. Generally that is a winning strategy. With all of the analysis I have done my gut is telling me that the most recent buy signal is very similar to the buy signal right before the C19 dump. BTC is in the process of basing out when the hash ribbon signals a buy and then very short uptrend occurs then a very rapid dump. That would be a very nice trend to trade due to how quickly traders could get in the money buying the dip. It is painful for holders because the capitation signal came to late to be useful.
My personal hierarchy of indicators puts the NVT over the hash ribbons, especially when comparing the weekly chart and the NVT goes above the red limit and then drops into the yellow zone. I see a very high probability that the NVT has to go to green on the weekly. If you view bitcoin for what it was designed to be, which is a trustless payment network with its own native currency, then when the network is overvalued (weekly NVT in the red) you sell the currency into strength and when the network is undervalued (NVT in the green) you look to buy the network's currency during dips.
Bearish Scenarios
The available history on bitcoin shows that it appears to "like" descending triangles as its topping formation. There is a lot of bearish divergence to work out as well. Since 2014 BTC has formed these descending triangle the Stochastic drops from overbought and falls to oversold and price seems to settle on the monthly Keltner channel before recovery, at least with candle bodies. A repeat seems very feasible. A double top is also possible but that hasn't been bitcoins history.
A bullish scenario
This has become my minority position but it is what I believe those still bullish will see if price retraces as I see it happening. Both a W and a descending triangle can have a roughly equal low and I think many traders caught in a descending triangle don't see it because the are looking for a W. Likewise, people, such as myself right now, may not see a potential W forming because they think they will be getting the triangle. People looking for a repeat of 2013 will be looking for the W.
The most emotionally painful scenario we could see is a symmetrical triangle. This would bet both bulls and bears keyed up and I think would result in the most people losing the most money.
Closing thoughts
For a while lots of people in crypto have looked to BTC to be the bellweather of the whole market and I am beginning to think that relationship is weakening more and more. I have thrashed out a system to help me determine trends and identify potential key reversals. According to that system BTCUSD has this month to go above and hold above $50,037 to clear both the monthly and MTF VSTOP x3 VSTOP. As the MVF and VSTOP very recently flipped bearish my operating assumption is the bear market just begun. Other cryptos have not shown this weakness. I am no longer comfortable thinking that weakness in BTC will drag down the broader market, and I am not comfortable thinking that a rising altcoin tide will raise bitcoin's boat. More and more I don't think we can say bitcoin is bullish, buy the market, or bitcoin is bearish, sell the market.
As I mentioned in the NVT analysis section, Bitcoin is a currency on a trustless payment network. Digital gold is branding and marketing and I think those that are buying it as digital gold, no matter how smart or wealthy they are, or how many laser eyes are posted, are buying it for the wrong reason. If you view it as currency on a trustless system then you buy the currency when the network is undervalued based on your timeframe and sell it when the network is overvalued, again based on your timeframe.
Bitcoin is in a very confusing time right now. There are lots of bullish sentiment happening with bitcoin but technically it is looking like the bullishness is beginning to fade and the price action is beginning to look bearish. Whether this is the first sell off or bear trap and price resumes higher in a macro trend remains to be seen. This idea will be focusing on the monthly and weekly bollinger bands and the NVT, with a couple of extra indicators.
Bollinger Band Analysis
Bollinger bands can be great tools at various stages of the market cycle, especially when combined with other indicators to verify support and resistance. They can also cut you deep when the bollinger bands fail as you think they may act as support and resistance. Once interesting way I have tinkered with the bollinger bands over time is to compare what is going on with the weekly and monthly when it comes to the upper and lower limits. During large upside impulses you will see the weekly upper limit completely above the monthly upper limit. Not shown here, but during these impulses ups you can even see the daily bollinger band complete outside the monthly BB at times. When that happens the times are heady but the hangover will be severe.
One sign the party is over is the weekly Bollinger band has completely moved back within the monthly bollinger band. The chart below will show that happened this week.
The last two times the weekly bollinger band moved into the monthly bb bitcoin was in a uptrend that ended up being a bull trap and the next move was over 50% to the lower limit of the monthly bollinger band before a serious bounce. Right now that would but us at about 24k.
NVT and Hash Ribbon Analysis
One thing probably not on most people's radar is the NVT, in particular because most people don't use this color coded version by aamonkey. I have been looking at this on the daily and weekly timeframes to help clear up some signals and right now the NVT is acting exactly like it did last bear market's descending triangle. After a massive sell off the NVT goes green and then price rallies and the top occurs around when the NVT goes red on the daily. This doesn't work for people looking to snipe trades but does let us know broadly what is going on.
The weekly NVT trend is likewise similar and something I pointed out when Bitcoin was topping. When the NVT goes above the red limit it signals the end of a bull market and severe retracements. It is only when the NVT finally passes into the green bands that price begins its recovery and never returns to those price levels. The main weakness of this analysis is we have limited history.
Many bitcoin investors look to the hash ribbon and its signals to buy and sell. Generally that is a winning strategy. With all of the analysis I have done my gut is telling me that the most recent buy signal is very similar to the buy signal right before the C19 dump. BTC is in the process of basing out when the hash ribbon signals a buy and then very short uptrend occurs then a very rapid dump. That would be a very nice trend to trade due to how quickly traders could get in the money buying the dip. It is painful for holders because the capitation signal came to late to be useful.
My personal hierarchy of indicators puts the NVT over the hash ribbons, especially when comparing the weekly chart and the NVT goes above the red limit and then drops into the yellow zone. I see a very high probability that the NVT has to go to green on the weekly. If you view bitcoin for what it was designed to be, which is a trustless payment network with its own native currency, then when the network is overvalued (weekly NVT in the red) you sell the currency into strength and when the network is undervalued (NVT in the green) you look to buy the network's currency during dips.
Bearish Scenarios
The available history on bitcoin shows that it appears to "like" descending triangles as its topping formation. There is a lot of bearish divergence to work out as well. Since 2014 BTC has formed these descending triangle the Stochastic drops from overbought and falls to oversold and price seems to settle on the monthly Keltner channel before recovery, at least with candle bodies. A repeat seems very feasible. A double top is also possible but that hasn't been bitcoins history.
A bullish scenario
This has become my minority position but it is what I believe those still bullish will see if price retraces as I see it happening. Both a W and a descending triangle can have a roughly equal low and I think many traders caught in a descending triangle don't see it because the are looking for a W. Likewise, people, such as myself right now, may not see a potential W forming because they think they will be getting the triangle. People looking for a repeat of 2013 will be looking for the W.
The most emotionally painful scenario we could see is a symmetrical triangle. This would bet both bulls and bears keyed up and I think would result in the most people losing the most money.
Closing thoughts
For a while lots of people in crypto have looked to BTC to be the bellweather of the whole market and I am beginning to think that relationship is weakening more and more. I have thrashed out a system to help me determine trends and identify potential key reversals. According to that system BTCUSD has this month to go above and hold above $50,037 to clear both the monthly and MTF VSTOP x3 VSTOP. As the MVF and VSTOP very recently flipped bearish my operating assumption is the bear market just begun. Other cryptos have not shown this weakness. I am no longer comfortable thinking that weakness in BTC will drag down the broader market, and I am not comfortable thinking that a rising altcoin tide will raise bitcoin's boat. More and more I don't think we can say bitcoin is bullish, buy the market, or bitcoin is bearish, sell the market.
As I mentioned in the NVT analysis section, Bitcoin is a currency on a trustless payment network. Digital gold is branding and marketing and I think those that are buying it as digital gold, no matter how smart or wealthy they are, or how many laser eyes are posted, are buying it for the wrong reason. If you view it as currency on a trustless system then you buy the currency when the network is undervalued based on your timeframe and sell it when the network is overvalued, again based on your timeframe.
הערה
Looks like BTCUSD broke my decision point of 50.5K which is a very bullish win for the bulls.
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