Bitcoin price analysis 29 May 2021

Disclaimer: The writer is not a Financial Advisor, and this article is not investment advice. The information is written for educational and entertainment purposes only. The writer owns only a fraction of a Bitcoin for experimental purposes. BTC markets are highly volatile and risky in nature. DYOR before making any investment decision, rather than listening to a stranger over the Internet.

Introduction

Bitcoin nosedived, losing almost 50% within a week, and currently hovering in the low $30,000 range. It came as a surprise and many investors were caught off-guard leading to huge long liquidations. According to bybt, the aggregate volume of long liquidations was $7.56 billion on 19 May 2021 alone.

A variety of events led to this massive sell-off, starting with Elon Musk tweeting on 13 Apr 2021 that Tesla will no longer accept bitcoins as a payment. There was speculation that Tesla might sell its hoard of bitcoins into the market too. This weakened an already over-extended market. The sell-off was further accelerated with the news frenzy that China is cracking down on mining, and banning bitcoin for the millionth time again. Although China’s crackdown on its mining farms is true to some extent, it was blown out of proportion. All of these events seem well-coordinated and planned along with the sell-off, however, this is not the topic of this piece here.

Technical Analysis

Now let’s see what the charts are pointing at!

The bullish market structure is no longer intact but this is not necessarily bad news. Investors can still position themselves to maximize their gains by opening themselves to several possible scenarios and prepare accordingly. Long-term holders will buy and stash if the price goes lower, short-term speculators will buy support and sell rallies, day-traders will keep getting in and out of the positions, and plebs will keep freaking out.

This analysis today will point out and try to chart various possibilities for the upcoming weeks and months. First, we look at the charts at different timeframes a.k.a technical analysis, and then move into some fundamentals.

Monthly:

The latest monthly candlestick doesn’t look promising, engulfing the last three-month gains and hovering just below 8-SMA. RSI is moving from bullish into neutral territory giving some early warning signs.

Weekly:

One of the major signs of weakness on the weekly timeframe is price closing below 21-SMA (green line in the chart at $48,000), which is a precursor of an upcoming decline in BTC price. A reclaim of this moving average can restore investors’ confidence in bullish continuation but it seems unlikely at this stage.

The below weekly chart is the ultimate chart to find potential support and resistances, highlighted in green and red respectively.

The blocks represent a range and stronger support or resistance as compared to lines. At this stage, BTC is stuck between $30,000 (support) and $40,800 (resistance). If BTC manages to close above $40,800 weekly, then the next strong resistance is $45,000-$48,000 (21-SMA is also hovering just above $48,000). On the other hand, if BTC closes below $30,000, then there is strong support at $27,000 being 61.8 fib level and presence of 55-SMA, followed by a support block at low $20,000’s. Anything below $20K could be bought aggressively by the buyers and potentially an absolute steal. However, it all depends on a breakdown or a break up from the above-mentioned range.

MACD also had a bearish crossover in the previous week.

Daily:

One of the major catalysts on the daily timeframe was losing 200-SMA. Currently hovering at $40.8K, this moving average is a major resistance for BTC for overcoming at this stage which is clearly evident on the chart. BTC is being rejected continuously at $40.8K signaling the presence of more sellers than buyers at that level. Surpassing this line would pave the way to $45K-$48K which is the ultimate potential upside at this stage.

Fundamental News

Following the potential support and resistances could be a lantern during these dark, uncertain market conditions.

Remember how it was mentioned earlier that it’s not all bad news. On-chain data shows some strong buying by the long-term holders when the price dropped to $30K. According to a market intelligence report by Chainalysis, whales bought almost 34K bitcoin during this crash and suggested that most of the sell-off was by retail investors. This hints a panic selling by retail investors and the dip is being scooped by the whales. Cathay Wood, CEO of Ark Invest, still believes that BTC could go up to $500K. Sweet!

Bitcoin recently saw an influx of institutional investors coming into crypto space, and buying bitcoin and ethereum using their company’s cash reserves. MicroStrategy, Tesla, Square, Meitu, and many more. A full list of known companies which have bought bitcoins can be found here.

A few billionaires recently came out and expressed their inclination towards buying bitcoins while other magnets like Warren Buffet and his partner Charlie Munger absolutely hate bitcoin. Charlie Munger went as far as saying:

“Of course, I hate the bitcoin success and I don’t welcome a currency that’s useful to kidnappers and extortionists, and so forth”.
Charlei munger on bitcoin

An argument that is flawed in its very core.

I do not believe that the negative opinion of these billionaires matter at all. They are already billionaires and have the resources to survive in ever-increasing inflation and if they miss out on one type of asset class, they can invest and earn returns on another asset.

Another investor and billionaire Carl Icahn (net worth: $15.6 billion USD Source: Wikipedia) said that he may get into cryptocurrencies in a big way hinting at an investment of $1.5 billion USD (Source).

Mark Cuban and Kevin O’Leary (Mr. Wonderful) have also gotten into crypto in recent months and are fascinated by the world of DeFi.

The fundamental analysis is too big to cover in this article in greater detail. BTC is here to stay and no matter how low this goes during the upcoming weeks and months, it’ll ultimately recover and reach new highs.

One potential scenario I will be looking at is this:

Warning: This prediction is completely hypothetical and one of the worst-case scenarios. It also doesn’t have to be an exact match in timing and candlestick sizes.

Key takeaways:

Bitcoin is bearish in the short to medium term at this stage. To regain bullish momentum, it needs to break above 200-SMA on the daily ($40.8K) followed by 21-SMA on the weekly ($48K) respectively. This being said, the probability of the bull market being over and the start of a multi-year bear market as witnessed after the 2018 top is low. The fundamentals remain strong and on-chain data analysis suggests that whales are buying the dip. By following the above weekly chart and moving from level to level to gauge the market strength and weakness can provide clues and add to the directional bias for the time being.

It resonates with a theory that there may be billionaires wanting to buy BTC, they have the resources to trash the market to scoop them up at lower levels, and then we can take off.

Whichever way the market goes, have a plan!