The impact of Federal Reserve policy and the longer-term market structure of Bitcoin suggest that the price of BTC is not yet ready for a trend reversal.
The price of Bitcoin (BTC) continues to fall below the $22,000 level and the broader narrative among traders and mainstream media suggests that a sense of risk is a dominant prospect ahead of this month’s Jackson Hole high. week.
During the three-day symposium, the Federal Reserve is expected to clarify its views on inflation, interest rate hikes and the overall health of the US economy.
In the meantime, traders on Crypto Twitter continue to fantasize about a “Fed pivot” where interest hikes will be reduced below 0.25 basis points and some form of monetary easing will reappear, but the likelihood that the Fed’s take on a short-term view seems unrealistic given the central bank’s 2% inflation target.
When it comes to the most recent Bitcoin price action, an old saying among traders is:
“Fades out the short-term trend in favor of the long-term trend.”
From a bird’s eye view, the price of BTC is in a clear downtrend with a four-month long stretch of recurring bear flags continuing to unfold.
The power of the hammer. pic.twitter.com/ayxELfsBdz
– crypto cap (@CryptoCapo_) August 23, 2022
Of course, the on-chain data suggests that the price may be at an all-time low.
Of course, the aggregate volumes and some on-chain data regarding whale and shrimp BTC addresses may indicate an accumulation.
Yes, open interest in BTC and Ether continues to reach all-time highs, fueling the bullish narrative for ETH Merge and ETH proof-of-work fork tokens ETH Merge and ETH, triggering a juicy short pressure on BTC and ETH.
Any of these things can happen, but beware the narrator of these hopium infused dreams and remember that the trend is always a good friend that a trader can lean on.
As unpleasant as it may seem, the trend is down. Bitcoin continues to encounter resistance at its long-term descending trend line and the price has failed to provide resistance at major moving averages such as the 20-, 50-, and 200-day MAs.
Each price drop simply creates a flagpole, and the ensuing “consolidation” creates the bearish flag continuation pattern flag. As seen in the pink boxes on the daily chart, the price of BTC simply trades within a defined range before breaking below it in the underlying liquidity indicated by the volume profile’s visible range and the charts. liquidity.
$BTC Example of yesterday’s aggregate optical optics
How to read liq cards: https://t.co/EaeFkgiggg
Join the conversation: https://t.co/Ac5ChFuNNl pic.twitter.com/nhVMv9suMH
— The Kingfisher (@kingfisher_btc) August 24, 2022
Essentially, there is “nothing to see here” until price reaches a few daily candles that reflect higher highs, i.e. BTC needs to clear $25,000 and close that gap of volume profile in the area of $25,000 to $29,000.
From there, one would either like to see a consolidation within this new upper range or a continuation of a trend reversal where the 20-MA and 50-MA are functioning as support. As mentioned before, of course, there are a ton of other data points that clearly show why the current price range is a buy zone, but what may be true for one trader is not necessarily the case for all.
Some investors can afford to open swing longs here and pull them down and exit them because they are flush and that is part of their plan. Others have a smaller purse and cannot afford the lost opportunity cost of being locked in a red position for months. Traders are always encouraged to do their own research, build their own thesis, and manage risk in a way that best suits their circumstances.
Jackson Hole is approaching and the Fed must continue with rate hikes until inflation and other parameters are under control. Stock markets remain closely correlated to the price of Bitcoin, so the tell tale will be whether or not SPX and DJI continue to ride higher, or if future Federal Reserve actions begin to dampen recent bullish momentum.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.