Bitcoin (BTC) finally went above 10.5K and this is great news ! It was one of the bigger resistances for a long time now and we finally managed to go above it. I said I was going to open a bottle of Champagne if we go above 10.5K so I will be doing that ! However it is not all party party and moving up from now on. A lot of people have turned bullish and crypto Twitter is very bullish at the moment. I am still going to be very careful, because there are several signs that tell me it is not all sunshine at the moment. I am going to show a couple of them :
Here is a daily chart of Bitcoin with the indicator Bitmex funding rate. It tells you if there are more longs or shorts on Bitmex. This indicator works very well and in general you countertrend this indicator. It means that if there are more shorts on Bitmex (means the lines are down) you go long and if there are more longs (lines are up) you go short. This is what Bitmex itself does, they trade against the herd ! When we were at 3.8K the amount of shorts were ridiculously high and it lead to BTC moving up relatively fast. Right now we can clearly see a lot of FOMO (Fear Of Missing Out). The longs are growing very high and a long squeeze (longs getting liquidated, prices moving down) seems very likely if it stays high like this. It does not have to happen today or tomorrow but it most likely will happen when high like this.
The second chart is a weekly chart of BTC with the indicator OBV (On Balance Volume) :
Looking at the red arrows I drew, you can see that there is a bearish divergence in the making on the weekly chart of Bitcoin. The On Balance Volume is one of my favorite indicators and I respect it a lot. You can clearly see that after the drop towards 3.8K in March 2020 the OBV went a lot higher than when prices were around June and August of 2019. Here prices were around 11K/12K. This showed to me that we were likely going to respect higher prices, even while we were consolidating for a couple of months.
Right now we have a bearish divergence and we need to see OBV climb further up this week above the high that we had on the first of June 2020. This however seems unlikely to me, so we most likely will create a bearish divergence. This is another sign for me that we could well see prices move back down again to cool everything down. Liquidate the moonboys and get them angry again.
By the way this bearish divergence in the making is not seen on the RSI (Relative Strength Index) on the weekly, but it is for now on the CCI (Commodity Channel Index). The more indicators show bearish divergence, the more likely it will fall down.
Three other signs that I am watching out for are the following :
The TD sequential, which showed a 9 on the daily yesterday. 9’s can often signal a end to a certain movement. In this case it was an upwards movement, so you might see some sort of correction. This indicator (like any other indicator) does not work every time of course, but it is worth watching.
The other sign is the volume itself. We have seen very low volume the last couple of months. The Bollinger bands were squeezing as well, which usually means a big move is coming. When a big move comes, you want to see volume expand to confirm the move. We saw BTC moving upwards with a 1000$ candle yesterday and volume spiked up as well, but the volume candle was not as high as I would have liked to see. Preferably this week I would like to see volume coming in, because the weekly volume candle is not that impressive so far. We are only Tuesday of course, but it is still very far off from the volume we had around March 2020 (big dump) and even the 4th of May 2020. Hopefully we can get very close to these kinds of volume.
The last sign is the fear and greed index which is at 76 at the time of writing this article, which is extreme greed ! This is dangerous as well.
I always look at Bitcoin when looking at Altcoins. I believe quite some traders moved there Altcoin trades back into Bitcoin yesterday and this is one of the movers for Bitcoin to the upside. Is Altcoin season over ? It might very well be. Often when Bitcoin starts moving it takes over all the space. We saw the Bitcoin dominance spike upwards yesterday. With Altcoins cooling down it might be an interesting time to check for buying the dips on them ! Take your time and have patience. Put FIB levels on and see for the pullbacks towards the 0.5 FIB level and the 0.618 FIB level. If Bitcoin is going to move back down, which is possible looking at some signs, you will most likely see alts moving down as well. Sprinkle your buy orders on your favorite alts and do not buy everything at once.
Hopefully this post does not get seen as too bearish ! I am very bullish on Bitcoin and Altcoins in the long term (years from now), but looking at the short term (weeks from now) I can see it move back down again. I want to see it hold the yellow line that I have drawn on the charts. You can see especially on the weekly chart how important that line has been since the low of 3.2K in 2018. Preferably Bitcoin stays above 9.4K/9.5K in the upcoming weeks. This would by the way close a CME gap that has been created around the 9.6K level. If we were not to hold these levels I think we might move back down towards 8K and even back towards the 7K/6.5K.