Many large speculators left the ship recently

15 Mar

Bitcoin dropped below $67,000 overnight. Interestingly, this price action was preceded by a bearish breakout in the RSI and a reversal in MACD and Stochastic on the daily chart. These developments are highly worrisome, especially as the stock market rally is losing steam at the same time as Bitcoin; since the two markets are quite overbought, the case for a correction continues to grow. Furthermore, as these two markets remain highly correlated, the potential weakness in the stock market presents a danger to Bitcoin’s performance. Another thing that is catching our attention is the dynamic observable among Bitcoin addresses with balances exceeding 1,000 BTC. These large speculators have been seemingly liquidating their positions amid Bitcoin’s spike above $60,000, all while retail investors are piling in Bitcoin ETF products. Overall, the environment is very similar to that in late 2021 when Bitcoin was near the top, with the majority of investors forgetting how quickly the sentiment can change and disregarding possibilities for the downside.

Illustration 1.01

The illustration above shows the daily chart of RSI. The yellow arrow highlights a bearish breakout below 70 points.

Technical analysis gauge
Daily time frame = Bearish
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of multiple indicators.

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.