Last week was boring with BTC consolidating after a swift drop a week before.
It started last week in the middle of a tight $25,800 - $26,300 weekend range.
It was slowly pressed down but that range low was limiting the downside on Monday and the market bounced a bit from there.
On Tuesday, the downward pressure continued, helped by a WSJ article about the BoJ investigation into Binance, which might have violated US sanctions on Russia.
On top, rising US yields were weighing on risk assets.
BTC managed to move further down below Monday low, but after triggering stops not only below $25,800 but also $25,600 and getting to $25,300 (hence squeezing some leveraged longs), it bounced back up.
On Wednesday, market participants were focused on the Nvidia Q2 earning report to be released after the cash equity market close.
Its Q1 report sparked enthusiasm for the economic outlook and gave the market (not only stocks but also crypto) a boost, so this time people were positioning long for something similar.
Hence BTC was bid up in the US session following the stock market.
That was accompanied by US yields moving sharply down and reversing up-move to new yield high from Monday and Tuesday.
BTC went through minor resistance levels of $26,300 and $26,600 (stopping out weak shorts in the process) to get to $26,800 (previous Friday high) just before the Nvidia report.
Strong earnings gave equities initial reaction to the upside but BTC didn’t want to go higher.
Eventually markets turned south on ‘buy the rumor sell the fact’ and were moving down on Thursday to cover the whole Wednesday up-move.
The key focus on Friday was on Powell’s speech at Jackson Hole.
He said that further hikes might be needed, repeated higher for longer mantra but acknowledged strong growth and deflationary pressures.
It caused some volatility on the market, but all in all the message was only marginally hawkish and Fed stayed data-dependent, which made BTC unchanged, trading at around $26,000 - that’s also where it’s been trading since then.
The situation on BTC right now looks almost exactly the same as a week ago.
We’ve been consolidating in a range for 10 days already.
$26,000 is the main level of interest and a magnet for the market.
Since the dump on Aug 17, BTC has been trading around that with most of the volume changing hands and most time spent there.
Any attempts to push the market either up or down have been eventually reversed to come back to $26,000.
It’s a sign of indecision.
$27,000 and $24,800 are range boundaries and key levels from the upside and downside respectively.
We would need a break of either on the daily close to expect more action and direction.
Especially the latter one is important as it is critical from a longer-term perspective, and if it gives way, further acceleration of the move down towards $19,500 can be expected.
Before the breakout from the range happens, mean reversion around $26,000 with choppy price action should dominate.
From a short term perspective in the range, worth looking at some minor challenges at $26,300, $26,600 and $26,800 from the upside and $25,800, $25,600 and $25,300 from the downside.
Please note that liquidity on the market remains dry.
It makes it quite easy to push the price short term to hunt for leveraged traders’ stops.
It also exacerbates eventual breakouts as extended periods of sideways trading lead to build-up in open positions with stops outside the range, which then struggle for exit with thinner orderbook to absorb them
That’s what we had on Aug 17’s sell-off, and that’s what we can expect to keep happening until liquidity starts coming back.
Have a great trading week ahead!
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