Bitcoin (BTC) is at a critical point at the moment. The moves it makes from here on out will determine whether the gradual shift in trend over the past few months has been of consequence or not. The above daily chart for BTC/USD shows that Bitcoin (BTC) cannot afford to mess around here. Since the month of July, we have seen a hidden bullish divergence. RSI seems to have found a strong support and is now expected to trade upwards from current levels. Similarly, wave trend profile for the above chart clearly shows a series of higher lows since July and also a new trend line that has held until now. Bitcoin (BTC)’s next big move is supposed to happen within the next 48 hours and here is why we believe it is going to be decisive.
Bitcoin (BTC) has established a strong demand zone since the beginning of this correction. This demand zone has seen the price bounce back soon as it entered these levels. This zone begins from $6250 and extends all the way to $5,800. The price of Bitcoin (BTC) tested the full depth of this demand zone in August and began a reversal from there as expected. However, before the price could retest the historical downtrend resistance, the price starting falling again and once again tested the upper limit of the demand zone. It reversed as expected, but this time it did not even attempt to rally towards the downtrend resistance and has now once again fallen back to retest the demand zone.
One interpretation of this might be that Bitcoin (BTC) is trying to muster some strength before it breaks the downtrend resistance. Another interpretation is that the market makers are trying to shake out the last wave of weak hands in order to accumulate more at lower prices. This interpretation is plausible because if you see the charts on a lower time frame, there are large wicks for red candles which show that stop hunting has been going on in a very systemic way. The last interpretation which is a very interesting one is that exchanges that offer leveraged trading are trying to lure in more short sellers by keeping Bitcoin (BTC) on ice. Exchanges like Bitfinex and Bitmex know that the sentiment is very low and that the number of shorts could pile up even more leading up to September 30, which is the expected date of SEC’s decision on Bitcoin ETFs. As most already expect a rejection, the shorts are preparing to pile up even though the effect is already factored in to a larger extent.
The above daily chart for BTCUSDShorts shows that the number of shorts has reached an all time high, trading inside a rising wedge. This is a very bearish indicator but when you are trading on sentiment, none of this matters. However, make no mistake; it does matter to Bitfinex and Bitmex and as we have seen in the past a few quick moves have liquidated thousands of shorts in a matter of minutes. These may not be Bitfinex or Bitmex insiders, we don’t know that and there is no point in pointing fingers. However, do not assume that these exchanges will not share info of your stop losses with market makers because it is in their interest that you get liquidated over and over again.
The fact that the number of shorts has reached this high a level and the sentiment is still overly bearish is a strong indicator in itself that the trend is about to reverse. Certainly, these centralized exchanges have ‘allowed’ people to push the market to a certain limit but they are not going to let you kill their game. If you squeeze their liquidity, there is no way they make money and so they will kick back as we have seen in the past. End of the day, it gets ugly for the small guys as they are liquidated out of their shorts, we see a big spike in Bitcoin (BTC) and it is all masked under some positive news. Of course, there are other worse techniques like wash trading and Tether printing. The fact of the matter is, volume of trading on a lot of these exchanges is already dwindling. If it were to go down from there, it would simply end their game. They know full well that decentralized exchanges are the future and that they only have a few more years to milk this cash cow. So, don’t fight it. They are not going to ‘let’ you take it from them. The charts give you valuable insights, they tell you what is going to happen, but to find out the why you have to connect the dots yourself.