BTC/USD: Weekend update
- Bitcoin price looks ready for a bounce to $42,000 or $43,000.
- Claiming these levels will open BTC for more upside.
- However, the current reversal structure looks fishy and things might change before the reversal actually kick-starts.
Bitcoin price reversal scenario was explained in detail in this post. While this scenario is still in play, this article explores a possibility where BTC might dip lower.
Currently, Bitcoin price has dipped into the demand zone, ranging from $34,592 to $35,74. The lower limit of this zone coincides with the buy zone that extends from $33,156 to $34,915.
Scenarios for a long position to $42,000+
The secondary demand zone, stretching from $32,414 to $33,406 was marked on the chart but its importance was not explained.
- The first likely reversal structure is the double bottom formation at $34,750, which was explained in this post.
- The other scenario is a swing low that sweeps $34,750 and dips into the demand zone ($33,156 to $34,915).
While both the scenarios are plausible, the second is more likely to happen. Here are the reasons explaining why.
- A lower low would shift the retail sentiment to bearish and hence more short-positions would be open with buy stops above the recent swing high at $38,247.
- Investors that longed BTC after the double bottom formation have sell stops resting below 34,750.
Why should anyone care about these sell/buy stops?
In simple terms, they are liquidity for market makers.
For market makers, getting their massive positions filled is not as easy. Therefore, they need to employ fakeouts to lure investors into the wrong side to collect liquidity which is present in the form of buy or sell stops, most of which are market buys or sells.
Refer to any videos about market makers on YouTube for a deeper understanding of how they function.
Basically, a pump above $38,247 and a dip below $34,750, will collect enough liquidity to spark a bull rally to $42,000-ish, which is a confluence of 200-DMA.
Fin.
Disclaimer: This is NOT financial/investment advice.
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