BTC Has a Favorable Set-up… but the 2018 Bear Has Rarely Let Opportunities Like that Manifest

BTC has a favorable setup in terms of many moving averages and more. For example, the MACD is gearing up to cross on the daily, and we already have crosses of key averages on lower time frames.

Let’s take a look at the setup, for educational purposes, to better understand how to apply some technical indicators and how to better understand crypto markets.

First, try checking out different moving average indicators on TradingView and see for yourself what I mean (I suggest GUPPY and the 12 and 26 MACD on the 1hr – daily).

It is bullish when the short term averages cross over the longer term, and it is bullish when the price action trades on top of these averages. You can see we have check marks on all of that on the lower time frames, and are approaching this on the 6hr and higher (although the daily looks like it is meeting so stiff moving average resistance).

The only problem here is that in 2018, bears have time and time again smacked down runs at points like this. In fact, there have only been four successful runs in all of 2018 (Feb, April, July, Aug). If you go to the chart and look at this with those indicators on, you can see this for yourself too! Here you’ll notice a lot of rejections at longer term averages if you look at key EMAs like the 50, 100, and 200.

Further, to the above point, while “a run” is nice for traders, for long term HODLers it’ll take something sustained and epic to break out of the downtrend and start a true uptrend.

Long bear trends are usually broken by way of sideways action (called by names like consolidation and accumulation).

Sometimes these trends have a capitulation “V” shaped bottom in them that acts as a sort of “spring” (the price pushes down, and then bounces back strong, testing the previous level, and then taking off). If this was to play out, it might look something like the chart presented below by CryptoWolf which apply’s Wyckoff analysis to crypto 2014 – 2018 to find a possible resolution to the bear market:

Everyone copy pasting the 2014 accumulation fractal. i see it completely different. as usual. pic.twitter.com/owDbVzzGyN

— CryptoWolf (@IamCryptoWolf) November 29, 2018

Putting that together, ideally the moving averages would allow for the larger bullish Wyckoff pattern to manifest.

With the above in mind, you can argue that previous to this drop we had a lot of sideways action in the $6ks, and one can envision a world where we go back to the $6k level for round 2 before soaring to new heights… but in general the 2018 bear market has not been overly kind to the over confident and anyone analyzing the market probably wants to keep that overarching truth in mind.

In simple terms, it is useful to look at moving averages to detect the start of a possible uptrend or downtrend, but in a bear market it isn’t uncommon for bullish setups to work as resistance.

So what happens here? Your guess is as good as mine honestly. We can assign probabilities based on the overarching bear trend, or we can zoom in and think about the favorable setup, but ultimately it’s a matter of probability and therefore at best educated guesses.

The point of this article isn’t to talk about what will happen in the future or what to do about it, it is instead to help you understand how to apply theories related to moving averages, Wyckoff, crypto market cycles, and trend recognition to your analysis of the crypto markets.

With that in mind, click any of the above links for more insight.