Why This Bitcoin Price Pattern Means Short-Term Pain

Bitcoin has held critical support after a move lower on Friday and is trading at $ 37,539. A good weekend pump has brought her back from the mid-zone of the $ 30,000 range and now she could make a push towards $ 38,000.

BTC is trending higher on the daily chart. Fountain: BTCUSD Tradingview

In the short term, recovering the $ 40,000 area seems like the most optimistic scenario, but if price action has had one thing in common over the past few weeks, it is a lack of volume.

Kevin Kelly, Co-Founder and Head of Global Macroeconomics at Delphi Digital published a report on the potential scenarios for Bitcoin. The analyst said that the leveraged positions indicated that a major correction needed to be made.

On the contrary, the price of BTC has been forming a “main head and shoulders pattern”. Therefore, the analyst believes that it is possible that the cryptocurrency is trending down and returns to the critical support of $ 30,000.

Bitcoin BTC BTCUSD
Source: Kevin Kelly, Delphi Digital

If the price of Bitcoin is trending below $ 30,000, a revision of $ 20,000 is possible according to the “traditional golden rule.” Kelly added:

However, technical analysis is just one piece of the bigger puzzle, especially when it comes to $ BTC. Having said that, a prolonged move under $ 30k could spell more short-term pain for hodlers; This price level also coincides with BTC’s 50-week moving average.

A 50% drop, as long-term BTC traders know, is not indicative of a guaranteed recovery. In contrast, the price of BTC has seen 80% corrections on its way to new highs.

There have been several instances where BTC rallied after a + 40% selloff only to find that its rally was short-lived. A somewhat recent example is December 19.

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Also, Kelly said that 85% of BTC addresses are profitable. In the past, minimum prices see a reduction in the number of UTXO’s in profit to around 50% or less. This suggests more short-term downsides.

BTC BTCUSD
Source: Kevin Kelly, Delphi Digital

In defense of the bulls, long-term holders have changed positions and started to accumulate after a period of profit making. However, as the analyst said, this metric rarely suggests an immediate upward shift in price action.

Looking at the total supply of BTC held by long-term holders in percentage, we can see that the trend has started to reverse. The total supply of BTC held by LT holders recently bottomed out at 58.5%, but is now above 61%. Again, this is a good long-term sign.

A major headwind for Bitcoin, in the short term, is the “slowdown” in central bank asset purchases. In previous cycles, the price of BTC peaks at the same time as YoY growth on central bank balance sheets, Kelly said.

BTC BTCUSD
Source: Kevin Kelly, Delphi Digital

The analyst believes that Bitcoin needs another catalyst, a large company to be added to its balance sheet, for example, for it to regain its bullish momentum. However, he believes that in the long term the trend remains positive for holders. Kelly concluded:

(…) Despite its recent decline, the long-term chart clearly shows BTC still in an uptrend. If $ BTC were to retest the previous support of $ 20k, then we would start to worry a lot more.

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