Crypto Market Weekly Analysis (Dec 12-Dec 18)

News and Fundamental

BTC Weekly December2021

After the whole market had been expecting Bitcoin to reach PlanB’s target, Bitcoin was rejected. Another seven days have passed, and they haven’t been any better than the previous week. First, let’s check this week’s news:

– After China banned crypto mining, bitcoin’s hashrate dropped significantly, around 70%. The network’s hash rate has increased by 108% since then and has recovered and returned to all-time high levels. Following the price drop under the $50K zone, Bitcoin’s hashrate remains strong and has increased more than 7% higher during the last week. This is very bullish for the whole network.

– One of the most talked-about topics in the crypto world is bitcoin mining energy use. Concerns over its energy consumption and environmental impact were mentioned as factors in the widespread migration of miners from the region during China’s crackdown. Tesla cited the same reasons when it eliminated the BTC payment option for its electrified automobiles after only two months of use. Right now, Bitcoin mining has surpassed 57% renewable energy, clearly exceeding the limit set by Tesla CEO Elon Musk in June as a need for the resumption of BTC payments.

– The United States Congress has approved a $2.5 trillion increase in the national debt ceiling. The repercussions of the US printing enormous amounts of its national currency in the last two years, as well as the repeated raising of its debt ceilings, are obviously clear. Inflation rates in the United States, which have historically increased at 3.24 %, have increased by far larger percentages in the last six months. Remember, on the other side there is Bitcoin, which is a deflationary asset, and there is no central authority deciding whether the number of newly produced bitcoins should nearly double in a few years like the dollar did.

– As the economy approaches full employment and the Federal Reserve deals with a jump in inflation, the Federal Reserve announced on Wednesday that it will terminate its pandemic-era bond purchases in March and pave the way for three quarter-point interest rate hikes by the end of 2022. “The economy no longer needs increasing amounts of policy support,” Fed Chair Jerome Powell said.

– In Turkey, where inflation is out of control, Bitcoin’s position as a store of value appears to be important right now. Bitcoin has reached its all-time high against the Turkish Lira, but not because of greater demand. Low interest rates, on the other hand, are causing the country’s currency to rapidly depreciate in value versus Bitcoin, dollars, and other currencies/assets.

-Russia’s central bank is aiming to make cryptocurrency investments illegal, intensifying the country’s long-standing anti-Bitcoin and anti-digital-asset sentiment. Current holders would not be forced to sell their holdings, but future transactions would be restricted. According to Russian officials, cryptocurrency can be used for money laundering and terrorism financing. The bank’s current stance on bitcoin is a “total rejection,” according to Reuters.

-In a recent interview with MarketWatch, Ray Dalio, the billionaire hedge fund manager and creator of Bridgewater Associates, stated that Bitcoin has “some validity.” “I’m not an expert on Bitcoin,” Dalio said, “but I believe it has some appeal as a minor part of a portfolio.” Dalio previously stated that he owned some Bitcoin in May of this year.

-The Securities and Exchange Commission in the United States has postponed decisions on two Bitcoin exchange-traded fund proposals, one from Bitwise and the other from Grayscale Asset Management. Commissioners of the SEC now have 45 days to investigate the Bitwise Bitcoin ETP Trust and Grayscale Bitcoin Trust proposals and decide whether to accept or deny them. A third alternative is to postpone the decision once more.

Onchain Analysis

Exchanges Reserves (Update)

Exchanges Reserves Dec2021

The Exchanges Reserves gives us a good view of the major trend of the price in the long-term. As mentioned before, after the major crash in May 2021, this metric started a downtrend which generally indicates an accumulation phase. As the chart represents, each sharp drop in the reserves has led to a bullish rally, which brought the price to higher levels. After that, near the price tops, we have seen a slow declination in the reserves, which has led to a price correction. Right now, after a slow declination in the reserves, which was followed by a deep price correction, we can see a sharp drop in the reserves, which again, shows us that an accumulation behavior has been going on. This is extremely bullish for Bitcoin in the coming weeks.

SOPR

SOPR December 2021

A week has passed and short-term hodlers are still selling/moving their coins in a total loss, as STH-SOPR indicates in the chart, while long-term hodlers are still in a total profit, even the LTH-SOPR has been rising this week. This means that we have strong fear in the market and big players are taking advantage of it and accumulating instead of panic selling their treasures.

Loss Percent (Supply)

Loss Percent Supply Dec 2021

This chart consists of the price and the Loss Percent (Supply) metric. Historically, at the price bottoms or late bear markets, the loss percent has peaked, and during the bull runs, it has been in a downtrend and reached lower levels near zero. After the crash in May, when the price dropped to the $29K level, the metric made a local top near 34%, and after that, it has fallen alongside the bullish rally in the price. But, during the recent shakeout, it has been going up, and right now, it has almost reached the prior local top near 34%. This is common in bullish rallies and while the price is in a correction phase.

NUPL (Net Unrealized Profit/Loss)

NUPL Dec2021

If Bitcoin prices continue to languish or decrease, we may utilize Net Unrealized Profit/Loss (NUPL) as a barometer for when more sell-side may be unleashed. The historical battlefield for bulls and bears is network-wide profitability of 50%, implying that half of the Bitcoin Market Cap is retained as unrealized profit.

This zone provides resistance in bear markets, as investors are increasingly prepared to reduce their positions at a moderate profit. On the other hand, it offers support from holders eager to add to their profitable positions during bull markets. The recent price decline appears to be a correction within a wider bull trend. The transition between these areas, however, distinguishes between Belief-Denial (green coloring) and Optimism-Anxiety (yellow coloring), which is a good depiction of current holder emotion. It’s probable that the current trading range is drawing a bull-bear line in the sand, and if it doesn’t hold, a big danger is a possible transfer into less favorable conditions.

Technical Analysis

Bitcoin

Daily Time Frame

BTC Daily Dec2021

Bitcoin has been conflicting with its great support, which is the 200-day moving average, for the last 7 days. As mentioned before, the 200D MA is an essential support/resistance zone for the price, depending on the condition. When the price is above the MA, we can consider it a great support zone, which we are right now. If we lose the 200D MA, we can expect lower price levels to come afterward. There is another support zone for Bitcoin, which is the $45,000-$46,000 area that is interestingly near the mentioned moving average.

Another interesting bullish sign is the divergence between the price and the RSI indicator, which is shown in the graph. This is a bullish divergence and considering the level we are at, with these two great support levels, we can expect the price to go up.

BTC Daily Fibonnaci Dec2021

Using the Fibonacci retracement, it can be concluded that the price is above but also near the 0.618 level ($44,457) which is a great support level in the Fibonacci. Generally, a bullish leg is needed to be followed by price corrections and according to Fibonacci, 0.5 and 0.618 levels are substantial levels for a correction in a bullish/bearish leg. 

4 Hour Time Frame

BTC 4H Dec2021

In the price action method, we have some price patterns that show us the probability of the direction the price will go. Usually, when we see the price moving in a descending wedge pattern, it can be considered a reversal pattern that reverses the trend, especially when the price is near either a resistance or support zone. Right now, the price is moving in a descending wedge (or maybe we can see it as a descending flag) pattern and it is reaching a great support level as mentioned in the daily chart. Hence, it can be considered a reversal sign.

If the price breaks the wedge from the top, it may start another bullish move to its next resistance levels, but there is also a chance of breaking the wedge from the bottom and going further down. Considering the sentiment of the market and whales/big players’ behavior, the probability of the wedge being broken from the top is higher than the bearish scenario.

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I'm Shayan(mostly known as Greatest Trader) an onchain analyst, Bitcoin lover, and Crypto enthusiast. I am currently a verified author and community specialist at CryptoQuant.

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