Shorter-Term Analysis of BTC Price Action
Dear Readers,
The first thing that comes to mind when looking at the shorter-term movement in price is elasticity. While the sell off at the time seemed the end of the world for some, sure enough the inevitable bounce back followed on as night does day… or should I say day night. This is Bitcoin.
Those that have been in the game for a few cycles have, or should have, become inured to such. More though I think, than this temporary volatility, is the perception of an underperformance on a higher time-frame that’s become the cause for some discontent among traders/ investors. By higher time-frame, I have the multi-month chart in mind, which is a shorter time-frame than the one discussed in the previous article that dealt with the long-term model. Time is relative.
Also, as I hope to illustrate, this sense of underperformance is in actual fact more of a perception than a reality, when viewed from the technical perspective. A further aim of this article will be to elicit the differences that might exist between the ‘mini-bubble’ of 2019 and the current price action… given that many are currently focused on their similarities.
The Daily Chart
Of significance here, from the technical perspective, as opposed to recent perceptions of a collapse in price, is that after an initial 2.9x increase [190%] price has remained for an extended period in the top quartile of that increase [just over the 0.23/ 23% in real values as drawn]. This focus on the real and relative [to the exponential move up] value helps safeguard against ‘money illusion’, where the focus is instead on the unwinding of the peak nominal number/ price that always seems worse. As mentioned in a previous article:
Given that the log scale tracks an instrument that moves exponentially on the y/ vertical axis, the technical tools to be used with this scale should themselves be in the log function. They will essentially measure the y axis spatially as this gives you the relative and proportional moves as relevant both to ROI and real values. With this in mind, anyone using a linear tool on a log scale is simply ‘macro-illiterate’ – they have yet to perceive the difference between nominal and real values, and the different way in which the tools then apply. For example, to use the standard/ linear fib tool on the log scale would be futile, for all the linear fib is measuring is the percentage decline off the peak price [which can equally be done on the linear scale]. As the linear fib is not really measuring anything at all on the log scale, and certainly not real values, it is completely redundant.
Also of significance in the daily chart above is the time fib, where the period of time involving the breakout from the previous ranging price near equates to the current ranging price at these levels. This bodes well in terms of consolidation, and with an expected renewal of strength subsequent to that.
The Weekly Chart
Overlaid on the weekly chart is the channel of the LGC [Logarithmic Growth Curve] model that many are familiar with. The more technical lines of interest, in the relative shorter-term, are those that are dashed and in bold. Also of interest is the weekly MACD that first failed to hit the upper line of resistance and now has pretty much corrected to the zero-line… from which, having consolidated, it could well make a renewed push upwards. Could it plunge further to the bottom support line? Possibly, but unlikely in my opinion - notice the more measured move upwards from that line in 2022, and also with consolidation half way up… as compared to the vertical straight move up earlier in 2019. This brings us to a further comparison between 2019 and the present.
2019 and the Present
The first thing noticeable is where 2019 could be classified as a ‘mini-parabola’, the present price action, and over a longer time period, is quite dissimilar. Whereas the 2019 move up is near vertical and only over the course of half a year, the recent move up has more of a technical character to it, and involving well over a year.
Notice also the technical lines of support and the extended horizontal range formed at the top. Does this mean that price must stay high and can not fall deep into the lower shaded band [the LGC ‘buyzone’]? Of course not. But what it does mean is that from a technical perspective we shouldn’t be over-weighted to think it will fall well into that shaded zone - it could just as likely find support and go on to new highs.
And finally another look at that MACD. Though price is high, the MACD has effectively re-set to the zero-line. Technically, price looks solid here… while if it were to go a lot lower it may require some kind of capitulation event akin to last time. While this is always possible, equally possible is a renewed run to the upside. The takeaway here, with price currently so close to that LGC ‘buyzone’, is that risk needs to be balanced to both sides here. No exposure? You’d want some. And if already exposed [hopefully not over-exposed] why would you consider selling.
Until next time,
Stay, relatively, safe out there,
Dave the Wave.