The majority of popular crypto-Twitter traders fell mysteriously mute as the carnage unfolded on August 28. As mentioned previously, the danger of issuing price action absolutes rooted in hubris is the unpredictably cruel hands of fate often bring down the self-assured faster than Icarus fell in his ill-planned mission to escape Crete.
Well, Bitcoin decided to take the bearish path, or maybe larger players that shape the market made the choice for it.
The ascension from the narrowing pennant proved to be a fakeout and a tweezer top at $10,278 was followed by a sharp reversal all the way to the bottom of the larger bull pennant that Bitcoin has traded in since topping out at $13,800 on June 26th.
As the day progressed, however, analysts began to piece together a narrative that explained how the bear break could have occured and some interesting theories surfaced.
A market maker makes a whale-sized trade
A $120 million buy wall on BitMEX stands out as an anomaly, (if those exist in the crypto market) that could have impacted today’s pullback but that is yet to be determined. One trader who goes by the moniker CryptoMonk suspects that the buy wall was “someone trying to unload some corn.” Or, in simpler terms, a large seller threw up a buy wall to maintain Bitcoin price while unloading from their own stack.
Another theory stipulates that the buy wall manipulates prices to meet a trader’s asks. At the end of the day the carnage resulted in a $144 million liquidation of longs on BitMEX and Bitcoin bulls had a little pep taken out of their step.
Whale Alert tracks $500 million in BTC transfers
There has also been an unusual number of large Bitcoin transfers taking place. On August 27 Whale Alert, a Twitter-based crypto transaction bot, flagged an 8,180 BTC ($82 million) transfer from one unknown wallet to another unknown wallet. This was the third massive transfer to take place over the past three days.
Just a day earlier 12,000 BTC ($124 million) was transferred and on August 24, 33,706 ($341 million) was transferred. While large crypto transactions are normal for the sector, half a billion dollars in Bitcoin over three days is notable. Further analysis of the transactions shows that these mega transfers are being consolidated within a single address.
Crypto-Twitter and investors are now left to wonder who could be behind the transfers and why they prefer to keep such a massive amount of Bitcoin in one place. It’s possible that an exchange could be responsible, or it could be a whale preparing for the next Bitcoin move.
Where do we go from here?
As a review, the Bollinger band indicator, Bitcoin Golden Ratio indicator and bearish Moving Average Divergence Convergence (MACD) all provided valuable insight into yesterday’s move.
As discussed in yesterday’s post, a sunny interpretation of the recent downside break would see BTC drop and hold at $9,400 – $9,500 then slowly work its way back up to $11,500.
While outside the pennant, $9,416 extends to the lower arm of the Bollinger Band indicator and BTC’s previous price action of consolidating within symmetrical triangles would dictate a touch at this point, then a journey back toward the upper Bollinger Band arm.
This arm is also near the upper arm of the triangle. $10,400 and $10,600 are likely to function as resistance points along this journey.
A less positive interpretation of yesterday’s price action would see Bitcoin drop below $9,400 and the lack of purchasing demand shown by the Volume Profile Visible Range (VPVR) could lead to BTC dropping to or below the 61.8% retracement level.
Dropping to $8,000 or $7,650 seems unlikely and one would expect that an oversold bounce would correspond with buyers showing healthy interest around $8,700.
Bitcoin remains in “accumulation phase”
Going back to Philip Swift’s Bitcoin Golden Ratio indicator, one can see that Bitcoin inched a tad bit closer to the green (350DMA x 1.6) line which represents Bitcoin accumulation.
As a quick aside, popular crypto-analyst FilbFilb also tweeted a BTC HodlWave chart which, according to his interpretation, shows that BTC selling is reaching an end as investors who bought Bitcon 3 to 4 months ago are now taking profits and these coins could be moving into larger hands that will accumulate and hodl in anticipation of the 2020 halving event.
FilbFilb cautioned that the:
“Data doesn’t mean go ‘all-in’ we’re going to pump imminently…it’s basically showing the probability being that we either ‘have’ or ‘are’ climaxing the selling from those taking profits and distributing to stronger hand who want to hodl pre halving.”
A month or two ago, profit taking would have raised eyebrows, but after two months of lower highs and lower lows, BTC appears to be weakening. Traders are either looking to lock in profits after a 200%+ gain or exiting their positions with the expectation of rebuying at a better price.
Non ‘hodling’ traders frown at the possibility of being locked into their positions in the event of a lengthy ‘accumulation’ phase.
What to watch for
Since July, Bitcoin had dropped to $9,100 twice (July 17, July 28) and it seems likely that the digital asset will revisit this point again.
The Relative Strength Index (RSI) shows oversold conditions and the last time the daily RSI dipped below 37.89 was on January 29 and February 7. It will be interesting to see if the RSI drops to this point and reverses course.
Prior to this occurring it’s possible that an oversold bounce will bring the RSI back to 40.94 to exit the descending wedge or turn down again toward 37.89. This action would likely occur around the $9,100 – $8,800 mark, hence the emphasis placed on the 128-day moving average and the 20-week moving average.
Top traders like Philip Swift, FilbFilb and WillyWoo suggest keeping a close eye on the 128-day moving average and the 20-week moving average as both have been effective indicators of when to accumulate Bitcoin.
Bitcoin is slowly dropping back toward the 20-MA of the weekly Bollinger Band moving indicator.
Investor sentiment could also be weighing on Bitcoin price action as the assumption that Bitcoin will return to the $7,500 to $8,500 range continues to be a popular idea.
This confirmation bias could be impacting short-term sentiment and impacting purchasing volume as investors are wary of being trapped in positions higher than $10,400.
For the short-term, it seems likely that Bitcoin will retest the $9,300 – $9,100 zone before making a more decisive move. Ultimately, Bitcoin is going to do Bitcoin things. The best we can do is sit back and enjoy the show!