Here’s an idea: we’ve been in a consolidation phase since February last year.

So here’s my theory on the current Bitcoin price action. We all remember when BTC was flying to the moon back in early 2021, when the price was climbing from around about $10k all the way up to $64k at its first peak. Then we hit that correction.

Well, what if $64k was the “peak” and we have been a stale market ever since? Hear me out on this one.

One of the metrics I like to keep an eye on is the 20W SMA and the 21W EMA which among those who follow Benjamin Cowen know as the Bull Market Support Band or BMSB. Back when BTC was going truly parabolic the price was close to 100% extended from the BMSB, basically begging for a correction. Price action slowed down but we didn’t see the crazy sell-off that typically comes with a true crypto-winter. We all know what happened next, BTC found resistance at $30k, bounced back to $69k, and has been dumping ever since.

Now I know $69k is a bigger number than $64k, but in my mind $64k was much more significant because of how quickly we got there. Since then we have chopped back and forth with the BMSB and BTC hasn’t really done anything too interesting. If you take a look at BTC’s price action since the run up it looks like this:

​

[Choppy](

This does not look bullish, nor would I say it looks bearish. In my eyes it looks stale. Nothing but sideways action.

What can we interpret from this data? Well, in my mind it looks like we could very easily continue to drop down to the $30k range before we see a correction so hang onto your butts if that ends up being the case. However, I also think this means we may have already started the reconsolidation phase of the Bitcoin market cycle. Let’s take a look at what the market looked like just before BTC went parabolic.

​

[Pre-rally price action](

Pre-rally price action

Before BTC shot up like a rocket, the price was waffling between roughly $7k and $11k and was functionally rangebound for 70 weeks! That’s well over a year for BTC to do basically nothing before enough pressure developed for the price action to take off!

With that as context, we are currently on week 60 of being rangebound between $30k and $64k, so I would expect at least another 10 weeks of BTC not doing much, but realistically I think we have an ever longer time frame on our hands. Market sentiment is low, many are experiencing what feels like a bear market for the first time and they are rightly uncomfortable. I’m sure some are questioning whether buying more BTC with their next paycheck is a smart move or if they got duped. Right now is a rough time to be in Crypto.

So, with all that in mind, it’s time for me to make a wild prediction about what the market is going to do in the future. Well, for starters I think the price of Bitcoin will go up, but probably not for a while. Looking at the chart below it’s possible we could hold support at $36k, but that’s more a hope of mine than any real attempt at technical analysis.

[Fingers crossed at $36k](

“Short term” I think that BTC is in for a bumpy ride, either continuing to chop between $30k and $60k for a while or maybe holding at that $36k line and slowly working it’s way upwards. Either way I do not think we are going to be going parabolic any time soon. For that to happen we need a lot of liquidity to be removed from exchanges. As order books dry up it will bring higher prices. I think that is something that will take months to bring to fruition, but I also think it is inevitable. Bearish markets are when only the truly steadfast believers continue to gobble up the liquidity. Once those HODLers have refilled their bags enough, supply will start to dwindle and price action will start to trend upwards.

So, with all that in mind, keep buying your bitcoin whenever you have the cash, and do what you can to remove it from exchanges when it makes financial sense. I know the fees can be a bitch and a half when you are dealing with small dollar amounts so do what makes sense for you, but if you can, get your coins off exchanges and into private wallets to do your part in removing coins from order books and liquidity pools, helping to drive price action in the direction we all want to see, up.

Thank you for coming to my TAd Talk.

No that is not a typo.

View Source

28 thoughts on “Here’s an idea: we’ve been in a consolidation phase since February last year.”

  1. Thanks for the analysis. I’ve felt the same but haven’t had an assessment of it. Consolidation – very healthy and look, if you believe crypto is the future, then you know it’s bullish.

    Reply
  2. I will save this for when the day comes that I believe in TA again.
    For now, I’m just chilling on the sidelines waiting for the issue about Russia to chill down.

    Reply
  3. I want to believe this, but the world has so much potential disaster level economic scenarios that I fear even if fundamentals continue to improve and patterns play out- the macro economic climate will fuck it all regardless.

    Reply
  4. We are still in a bullish uptrend on higher time frame. “IF” btc breaks down below $28k, that would create a lower low and break the uptrend. Until then, I don’t believe this bull run is over. Another thing to note is bitcoin peak has been lengthening with each cycle. If November 2021 was the cycle top, this would be the first time in bitcoin’s history the top was reached in shorter amount of time than the previous cycles. This doesn’t match. More realistic time frame would be somewhere between June of this year to maybe into early 2023.

    Reply
  5. I admire your cross-analysis of FA / TA.

    First, to clarify for readers, please denote which time interval you’re showing your charts at, and the dates that you’re observing (this looks like 61 weeks?). You are otherwise leaving the charts way too open for interpretation. Where are you starting and ending your historical analysis?

    I suggest incorporating volume indicators in your analyses, as I do with any other TA post I see here. You can have a red or green candlestick close with low or high volume and it points you in the direction that the money is moving (if it’s moving at all).

    >Either way I do not think we are going to be going parabolic any time soon. For that to happen we need a lot of liquidity to be removed from exchanges. As order books dry up it will bring higher prices. I think that is something that will take months to bring to fruition, but I also think it is inevitable. Bearish markets are when only the truly steadfast believers continue to gobble up the liquidity. Once those HODLers have refilled their bags enough, supply will start to dwindle and price action will start to trend upwards.

    I don’t find this analysis holds weight. This doesn’t mean that positive parabolic behaviors are suggested by my comment, as a disclaimer.

    The reason for my disagreement with your thesis on this is because liquidity exists in the market: in fact, there is a LOT of it, in the form of stablecoins, held in various DeFi protocols or similar.

    I have commented for a few months that stablecoin market capitalization has been steadily increasing since fall: take a look at the change in market cap for USDT, USDC, BUSD, UST, and to a lesser extent, DAI and FRAX. This is also not including MIM which has at least $1b locked up in Curve, and LUNA, upon which UST is greatly dependent on. You can also find that in the last year, the amount of money locked in DeFi protocols has increased [by a factor of 5x](https://defillama.com/).

    At time of writing, the [market capitalization of stablecoins is $181.7b](https://coinmarketcap.com/view/stablecoin/), which is about 10% of the crypto market capitalization. Of that amount:

    * Tether has 43.72%
    * USDC has 29.03%
    * BUSD has 10.07%
    * TerraUSD has 6.76%
    * Dai has 5.55%
    * Frax has 1.46% (Frax is highly used by Convex Finance)
    * The other 3.41% is made up of players like: TUSD, USDP, MIM, and a bunch of other random ones.

    Some retroactive FA can suggest that recent market sell-offs are due to looming regulation over stablecoins (which have been seen relatively positive compared to many other cryptocurrencies), and de-risking + tax-loss harvesting before taxes are due in April. Post-tax season, the cash that’s being held in stasis will tide into assets over time to avoid price shock. If interest in crypto picks up, large buys can be made which drives up the price (lack of supply, greater demand) as we saw in fall 2020.

    Lack of supply on exchanges also does not equate to supply shock behaviors. Consider it a correlation to the company’s valuation and watch what they do when it happens.

    For example, Coinbase is pushing the Coinbase Wallet, which utilizes DEXs to obtain the asset of your choice on a network like Ethereum or Polygon – MetaMask does this, but it’s pretty expensive and not as user-friendly (and it’s also not “in-house.”) By levying fees on DEX swaps, they can sustain their income past trading fees. Exchanges act as a fiat on-ramp to DeFi which is really unique because once you get your stablecoins, you can just use DeFi to buy any asset you can think of. (Coinbase Wallet is a smart move and it’s actually pretty cool.)

    This is really important to note because if there is a lack of user influx bringing in new money to outweigh $181.7b of current money, asset prices will bleed out. It is a good time to accumulate and when larger amounts of money can move asset prices, then they will.

    I would encourage you to take a look at liquidity protocols on DeFi including Ren, Aave, and Curve. Additionally, peer into wBTC and wETH transacting volume over different protocols – there’s a lot of trading around wETH / stETH in particular.

    Now, as it relates to your analysis on Bitcoin, essentially that whole asset is tied up with a lot of different uses. Leverage (incl. marketing incentives), settlements between larger players, de-risking in DeFi…peer-to-peer sending exists, just, not really in BTC.

    I digress. I enjoy reading TA as it’s how I shimmied off from my last job. Thanks for posting.

    Reply

Leave a Comment