Bitcoin Price Analysis: Is BTC in a Temporary Shakeout or Bearish Momentum Incoming?

Global stocks continue struggling to retain gains as investors remain uncertain of the new Omicron COVID variant. So far, the SPX has seen rallies being sold, with intraday reversals and closes at the lows, indicating the near-term risk remains high.

Global macro risk-off, Federal Reserve Commentary on continuing tapering bond purchases, high leverage on BTC derivatives are all near-term headwinds for BTC and could cause volatility.

Despite this, though, the on-chain data remains firmly bullish, potentially providing investors with more buying opportunities if we see long liquidations or stock market volatility.

The Technicals

With a 22% drawdown from the recent highs at $69k, sentiment has turned from greed to fear quickly. The higher time-frame charts remain bullish as BTC continues to print higher highs and higher lows when looking at price action for the year.

The near-term technicals have been showing positive developments such as 4-hour and 8-hour bullish divergence, price making lower lows, with RSI making higher lows. The daily momentum has been flattening and slowly trending higher, which is another positive development for the short term.

The bulls need to hold the near-term lows at $53.3K and start making higher highs and higher lows to confirm a bottom has formed. Failure to hold $53.3K can easily send BTC towards the region between $53K and $50K, which is the next major zone of confluent technical and on-chain support.

Considering the SPX entering a pullback, BTC has held up quite well, which makes the current conditions look similar to September and October, where BTC outperformed the SPX even with global macro risk-off

In case of further selling pressure from stocks, uncertainty on Omicron, and even long liquidations – it’s critical for BTC to hold the 21-week and 21-week EMA at $51K and $53.1K. Selling pressure has been coming mainly from an overheated futures market, younger coins realizing losses, and macro risk-off as stocks tested major technical resistance, bearish divergence, and now uncertainty over monetary policy and new virus concerns.

The On-Chain

Despite the near-term volatility and the 22% drawdown, the overall trend in on-chain indicators remains bullish as long-term holders and miners have not been selling the pullback aggressively.

Long-term holders and miners aggressively selling with price falling is a major sign of concern, especially for the bull market. The fact that the price fell with all exchange reserves making new multi-year lows, signals this is unlikely the start of a bear market.

Typically, exchange reserves start increasing significantly as investors deposit BTC onto exchanges to sell. Declining reserves on exchanges, especially throughout most of 2021 show a strong trend of accumulation. Since November 1st, 2021, all exchange BTC reserves have fallen by around 62,500 BTC, sending reserves to a new multi-year low of 2.3 million BTC.

This means 89% of the total supply of BTC is off exchanges, which is not currently available for sale.

Conclusion

The near-term technicals have been slowly improving when looking at momentum indicators, but it’s too early to call a bottom as we need to see higher highs and higher lows.

The near-term risk from the stock market pullback, uncertainty on monetary policy and the Omicron variant, and high leverage can be seen as headwinds for BTC. It has been holding well despite the risk-off in stocks, but we have to remain cautious as liquidations from derivatives can still send it to $53K and $50K.

The overall trend in fundamentals and on-chain remains firmly bullish, but for now, we have to wait and see how stocks trade for the rest of the week and look for signs of a potential bottom forming on the SPX. The near-term risk remains high, so investors might want to patiently accumulate BTC at technical support, spreading out buy orders in case of liquidations or further downside in stocks.