The final flush?
In the tradeletter from last week I tried to warn all of you that it was very likely that we were going to see a move lower on BTC. Well we all know what happened next.. The flush was quite harsh and to be honest I did not expect the price to drop this far, but why did it drop this far? The harsh drop on Bitcoin, and the entire cryptomarket, came due to the fact that we have very low liquidity in the marketplace. There is no volume to trade effectively, all moves are fueled by borrowed money and the interest in crypto is really low. All these things simply create a very bad trading environment. However, what should we expect from crypto in the coming days? In this tradeletter we are going to make a deepdive into BTC to see what we should look out for.
FVG did not function as support
Last week I mentioned that I expected BTC to drop when we were still chopping inside the range. The main area I was looking for to be filled up was the daily imbalance. However due to a lack of liquidity in the market, we nuked straight through it and that was not a thing that I expected. This makes the current market situation quite tricky..
Orderblock is holding support so far
When we look at the chart right now, we can see that we are trading inside an orderblock on the daily timeframe. It is functioning as support, but the candles on the daily timeframe are not looking convincing. They are indecisive and we are not seeing any signs of strength at this stage. However it is quite normal to see price doing nothing after such an expansion move from a price delivery perspective.
In the image above you can see what price is going to do after specific types of moves. We had an expansion move towards the downside, so price is likely to see a retracement or we are going into consolidation. We are currently in consolidation again so seeing that is quite normal.
Longing to soon
After such a drop, people get really eager most of the time. They want to get right back into action and they start looking for longs again, because they think that that is the most logical thing to do. However, we are consolidating and to get more confirmations for your trades it is important to let price create a range. Currently we are in the middle of the pack and price did not create a confirmed range high/low as of yet. People who were longing in the middle of the range got flushed for longing to early and price is again at the same level. It is important to be patient here, let Bitcoin pick a side and anticipate on that.
The two levels I am looking out for
When we are looking at a range it is important to focus on the extremes of the range. This will say look out for the range high and range low. The mid range is already well respected, but the range high and low are unconfirmed. So, if you would like to trade these levels, I would suggest you to wait how price reacts from these levels and anticipate accordingly.
In conclusion, actively trading is quite hard at this point. The markets acquire an extreme amount of patience and we see weird moves due to a lack of liquidity. We are in hard times, that is for sure, but if you are able to remain strong, than you can reap the rewards in the end.
Written by: Daan Foppen
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