Is Bitcoin ready for bullish continuation in a lengthening cycle?

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Is Bitcoin ready for bullish continuation in a lengthening cycle?
By Eight Team • Issue #1 • View online
Written by Michaël van de Poppe

The market has been correcting since the previous all-time high of $69,000. Through this correction, the ultimate question has become whether we’re going to repeat the 4-year cycle or whether we’re going to have a lengthening cycle.
However, the effects of the halving are decreasing heavily, as impacts of the Dollar have been increasing year-by-year on the price movements of Bitcoin. And let’s face reality; if the 4-year cycle continues to happen in the coming decades, trading would be too easy, right?
Therefore, let’s have an analysis of the markets for Bitcoin here with the current outlook for the entire cryptocurrency space.
BTC/USDT 1-day chart
The daily chart shows a clear bearish divergence at the recent high at $69,000, resulting in a correction of more than 20% since.
However, corrections tend to happen regularly in the markets, as multiple corrections have been taking place in the previous cycle too. In 2017, standard corrections of 20-40% have been taking place on and on, resulting in a massive high peak at the end of 2017.
Currently, the cycle is showing a different path compared to the one of 2017, as the price movements accelerated between October 2020 and May 2021, without any brief correction. After that, a harsh retracement took place for more than 50%, resulting in another run to the recent all-time high of $69,000.
Therefore, cycles are adjusting. Crucial levels and realization should be made that the cycle might be taking longer this time, as macro-economic impacts are happening in the markets.
Looking at the daily chart, the 1.618 Fibonacci extension has been reached, which is often a beautiful indicator for taking profits on the markets. Since then, a correction has been taking place, through which crucial support levels can be derived.
The two crucial levels of support are shown in the chart. The first one is receiving tests right now, as the price action itself shows a clear bounce from this region in the first place. Shortly, we’ll dive into the lower time frames shortly.
The first support zone to look at is the region between $54,000-56,000 and that’s already receiving some bounces. If that one is lost, the markets are looking for lower levels to be hitting for support and the crucial one is structured in the lower green box.
This lower green box is identified as the ‘must hold area as the entire bullish structure is created through that zone.
What do we mean by that?
A bullish structure is defined from higher lows and higher highs. The market has been making those and, for further bullish momentum, you’d want to avoid any massive breakdowns to be taking place destroying that structure. The weekly timeframe identifies the higher lows and higher highs and gives a proper insight into this view.
BTC/USDT 1-week chart
The weekly chart shows the structure of the markets. Higher lows and higher highs are created, through which a bullish structure can be identified for the markets. In order to keep that momentum rolling, the market wants to avoid any breakdown beneath the recent higher low.
The recent higher low is found at $42,000 and the entire green zone is the area that the market needs to sustain above to prevent itself from a bear market.
As long as Bitcoin’s price sustains above $43,000-47,000, the market can continue in a bull cycle, and, as a matter of fact, in the lengthening cycle that we think we could be seeing.
Finally; no need to worry about the recent breakdown beneath $60,000. The price of Bitcoin has dropped beneath $60,000, as a result of the recent correction. Through this, the all-time high resistance of May 2021 didn’t flip as support, but that isn’t a bad thing for the markets overall.
The crucial level to sustain is the level around the $43,000-47,000 support zone to hold. If that level sustains, the markets can continue rallying in 2022.
On-chain data shows mid-bull cycle numbers
The picture shows the total supply held by long-term holders. Quite often, a massive indicator for a potential reversal to spot on the markets. Especially, if the long-term holders are selling their positions, it’s time to pay attention as a reversal might be around the corner.
Looking at the previous cycles, the long-term holders have been offloading heavily during the entire run, which can also be seen in the recent rally of the markets in May 2021.
On the other hand, the moment that long-term holders are starting to accumulate (which is seen in the recent period between July-August 2021, the period where Bitcoin was consolidating around $28K), it’s time to pay attention in the form of buying opportunities.
Very simple information can be gathered from those charts, through which the current conclusion can be drawn that long-term holders are still holding Bitcoin massively. As the recent data shows, no real sell-off is taking place from long-term holders. Through that, a bear market or harsh correction isn’t around the corner as the long-term holders would be the group to be selling their positions entirely.
In that perspective, the current correction could be classified as a standard and healthy correction for the entire market to be taking place.
MVRV Ratio confirming mid-bull cycle numbers
Another indicator is the MVRV ratio, which is the Market Value to Realized Value (MVRV), the ratio between the market capitalization and the realised capitalization. It gives a clear view of whether the valuation of Bitcoin is trading above or beneath fair value.
At this point, the conclusion can be drawn that the price of Bitcoin is trading around fair value as the orange line is between the heavy boundaries.
On the cycle lows, conclusions can be drawn that the valuations are beneath fair value, through which buying opportunities can be derived for any investor or trader in the markets. However, on the contrary, when Bitcoin’s price is reaching a peak high, conclusions can be drawn that the markets are ready for a short term correction as Bitcoin’s price is trading above fair value.
Those examples are given on every peak high cycle, as the MVRV ratio overshoots heavily to the upside in this case.
Currently, Bitcoin’s price is acting between the boundaries and just in the middle of the pack. The easiest conclusion, alongside the long-term holder’s supply, is the fact that Bitcoin is just facing a lengthening cycle and a prolonged bull cycle in which returns take longer to happen, but also will be lower over time as the market is growing and expanding year after year.
Dollar showing strength -> reason for the correction?
The most important indicator for strength or weakness on Bitcoin’s price is the Dollar, which can be followed through the DXY index.
On the chart, a comparison is made between the price action of BTC/USD (black/grey candles) and the DXY index (orange line).
Overall, the moment the Dollar shows heavy strength with impulsive breakouts, it will have an impact on the price action of Bitcoin. In this case, often it’s a negative impact on the price action as Bitcoin’s price usually drops when the Dollar shows strength.
On the left, since the March crash in 2020, the Dollar has been showing heavy weakness (due to the fact that the money supply has been accelerating heavily), which was the best period for Bitcoin to succeed and rally in terms of price movements.
Right now, the Dollar is showing strength once again, through which weakness is shown on Bitcoin’s price, resulting in the recent correction. If the Dollar succeeds in this run upwards, a further corrective move could be taking place on Bitcoin’s price as that correlation is one of the heaviest in the markets.
BTC/USDT 4-hour chart
The 4-hour chart is a beautiful chart to check for bearish support/resistance flips and the importance of understanding this price principle in trading.
If a market is trending upwards, the price action shows positive support/resistance flips resulting in resistance becoming support. In that case, the price of Bitcoin has been showing significant bounces from the $60,000 support zone at the end of October 2021 (see the chart for references and bounces on the horizontal red line).
Right now, in the recent price movements, Bitcoin’s price has shown a rejection of the exact same level as the red zone couldn’t break upwards. This red zone is the $60,000 resistance area to breakthrough. Right now, Bitcoin’s price action is rejecting heavily from that region, resulting in a breakdown of the price towards the support levels, once again.
In that way, as long as Bitcoin stays beneath $60,000, there’s no reason to become bullish. It’s time to let the prices unfold the way they do. What should be something to look out for? If Bitcoin’s price consolidates and continues to correct (through which $60,000 didn’t break), a test of the green zone between $53,000-55,000 could be taking place. That would result in a potential sweep of the previous lows and a potential bullish divergence to be taking place.
Such a bullish divergence is created through a price that makes lower lows, while the indicator (in this case the RSI) creates higher lows.
The left part of the picture shows an example. 
Quite often, bullish and bearish divergences on higher time frames are a crucial indicator to spot market reversals (tops and bottoms) as they pop up at those reversal points.
At this point, the market is still correcting, as Bitcoin’s price is showing weakness, due to the increasing index of the Dollar. On the other hand, Layer 1’s are rallying substantially, resulting in massive gains for the people who are part of that position.
This shows that the correlations in the markets are dropping heavily and that projects and platforms are running or correcting on their own, not dependent on what Bitcoin is doing.
A crucial indicator here, and something to still be looking out for, is whether segments and niches of the markets are going to be uncorrelated to Bitcoin in the future. Overall, a correction and sideways action is a very normal outcome to be happening. The entire cryptocurrency market is valued at $2.5 trillion, which is practically nothing compared to other assets.
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