Bitcoin continues a fairly mild decline that could turn into a full-blown crash. For now, the move still looks corrective, but Bitcoin is steadily sliding lower. Recall there is a non-negligible probability the downtrend has already ended. However, the reasons for a new "bull" trend remain ambiguous and debatable. The last three-month rise was essentially a move from the lower boundary of the daily sideways channel to the upper boundary after a deviation formed at the channel's lower edge and then at the upper edge. The upper-edge deviation was deep, but if it truly was a deviation, Bitcoin could head toward $70,800 in the near term. After that, the price would likely sit inside the flat again, and its prospects would remain uncertain.
Yesterday, the Federal Reserve held its penultimate meeting of the year, and it essentially changed nothing in market expectations or the outlook for U.S. monetary policy. The Fed left the policy rate unchanged and did not alter its plans for future rate moves. Thus, the market still expects further tightenings likely in December and again in March. As we said earlier, that is a negative scenario for Bitcoin. The market sold Bitcoin yesterday and again overnight — a logical and expected reaction — but we also note the market repeatedly struggles to clear the psychological $80,000 level. In short: each time price falls toward that level, buyers step in. For now, price cannot convincingly break below $80,000, which is blocking a clear, sustained move lower for "digital gold."
Remember that the single factor currently limiting Bitcoin's decline is the $80,000 level, which also coincides with the lower boundary of the 4-hour sideways channel. The last deviation below that boundary did not produce a meaningful rebound, so we believe Bitcoin will eventually break that line and that level. Still, it must be admitted the bears presently lack conviction and momentum.
General picture of BTC/USD on 1D
On the daily timeframe, the downward trend structure has broken, so "digital gold" has likely moved into a new bullish trend. The price worked off the bearish FVG from the previous trend, reacted to that pattern, and a correction began as expected. However, the September breakout beyond the $60,000–$82,500 sideways channel may still be a deviation which, combined with the reaction to the bearish FVG, could trigger a drop toward the lower boundary of the sideways channel. Another sell signal formed inside the last bearish FVG. In addition, a bearish order block has formed, also pointing downwards and potentially generating another sell signal.
General picture of BTC/USD on 4H
On the 4-hour timeframe, a downward structure continues to form. The CHOCH line is currently at the $87,000 level. On the daily TF, all necessary downside reversal signals have been received, allowing traders to open short positions. Bitcoin's targets are best determined by the daily sideways channel, which we regard as still relevant. On the 4-hour TF, a flat persists; the upper-boundary deviation of the sideways channel led to a drop to the lower boundary as anticipated. Given the number of bearish patterns and sell signals, we would expect an exit from the sideways channel via the lower boundary and a further decline of the leading cryptocurrency. The recent removal of liquidity from the lower boundary did not trigger a sharp rebound, so liquidity at current levels appears lacking. In that case, the decline of "digital gold" is likely to continue.
Trading recommendations for BTC/USD
Bitcoin shows signs of the start of a new bullish trend. As is typical, this trend began with a pump with no clear, specific reason. However, in the near term on the daily TF, Bitcoin may be in a decline because the price reacted to the last two bearish FVGs and formed a bearish order block. Also note that the breakout beyond the daily sideways channel may be a deviation — yes, a deep deviation, but still a deviation. If so, Bitcoin could head toward $70,800 and even maintain the downtrend that began last year. We believe short positions are most relevant in the near term. The deviation near the lower boundary of the sideways channel on the 4-hour TF does not look convincing, and a breakout on the 4-hour TF would allow the move south to resume.
Explanations for the illustrations:
CHOCH — Change of Character: a break in trend structure.
Liquidity — Liquidity: stop-losses and pending orders that market-makers use to accumulate positions.
FVG — Fair-Value Gap: a price-inefficiency zone. Price moves quickly through such areas, indicating one side is absent from the market. Subsequently, price often returns and reacts to these areas, continuing the main trend.
IFVG — Inverted Fair-Value Gap: after returning to such a zone, price does not react there but impulsively breaks through it and then tests it from the other side.
OB — Order Block: a candle where a market-maker opened a position with the intent to take liquidity and then establish a position in the opposite direction.
