Within minutes of rumors spreading regarding the SEC’s classification of both bitcoin and ether, the entire crypto market breathed a sigh of relief as everyone enjoyed a nice bounce. Prior to the news, bitcoin saw several days when buyers began to disappear from the market. After bottoming in the low $6,100s, the SEC news spread and a modest rally on relatively low volume ensued:
Figure 1: BTC-USD, 1-Hour Candles, Weak Rally
Although the move was sudden, the overall volume behind the move was poor. You can see on the hourly candles that the volume barely made a noticeable blip on the radar. However, one noteworthy thing occurred during the rally: The price managed to break back into the macro trading range it has been bound by for the last 5-6 months:
Figure 2: BTC-USD, Daily Candles, Macro Trading Range
Part of our previous discussion centered around known support levels and their implications. The first line of support was outlined around the $6,450 values. As you can see, the price temporarily dipped below support on high volume and saw a short closing rally which pushed the price back into the TR. Now, at the time of this article, we are testing the support of the $6,450 range again. If we fail to hold support, we will undoubtedly test the support of the February low ($6,000).
Although we are trending down for now, there is an argument to be made from a macro perspective that we are actually witnessing supply absorption within the context of a large scale Accumulation Trading Range (TR). The volume trend suggests that there is potential supply absorption and we are now heading toward a potential shakeout (sometimes referred to as a “spring”):
Figure 3: BTC-USD, Daily Candles, Potential Accumulation TR
The low-volume, meandering price structure over the last several weeks is very representative of what is known as a “creek” within a TR. A creek is basically meant to grind down investors, bore them, and ultimately demoralize them prior to a shakeout. It’s designed to make the investor think “bitcoin is dead,” essentially.
Granted, the aforementioned accumulation TR argument should be taken with a HUGE grain of salt as this still has several tests it must pass before any degree of confidence can be placed on it.
First, we must see how support holds on the test of the $6,450 and $6,000 levels. Then, we must see how the price reacts to new lows in the event that we break to the downside of this TR. And, even then, it is still very difficult to identify a spring while you are in the middle of it.
So, just use caution when attempting to trade this TR because it is fraught with bull traps, bear traps and every other kind of trap you can think of. For now, we need to just play it day by day and look at the cards as they are dealt.
- Rumors of SEC categorization of bitcoin and ether preceded a modest rally on low volume.
- The low volume indicates that sellers are still reluctant to return to the market.
- We are currently in the process of testing important support levels and we need to keep a skeptical eye as monitor the market and gage the reaction to these new support tests.
Trading and investing in digital assets like bitcoin and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.
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