Trader outlines likely Bitcoin price moves after rally above $11,000

The market outlook is provided by trader Ilya Meshcheryakov.

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Last week proved quite positive for the entire cryptocurrency market. The breakout from the ‘triangle’ added momentum to BTC, which at one point rose to around $11,700.

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Bitcoin’s rise also affected other coins — some gained more than 20% over the past 7 days.

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After a substantial strengthening of BTC, which I believe is mainly driven by speculation, a pullback followed, and at the time of writing the review its price was around $11,400. That is more than $300 below the local high.

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In the previous analysis I expected a false breakout of the triangle to the upside for a brief liquidity grab above $11,000. This liquidity consists of stop orders and short-position liquidations.

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If we return to the last consolidation zone in the triangle format and look at the volume profile, we find that the largest volume of trades occurs around $10,700 (in red on the chart below), and liquidations of mid-range leverage (I include 1:10) fall in the $11,700–$11,800 range.

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The probability of a deeper squeeze is not very high, so a move beyond the current high could lead to a further break of $12,500.

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For now I will stick to the speculative move that has already run its course. Going forward I expect the bear scenario to unfold amid negative factors — a second wave of COVID-19 and a probable new wave of countermeasures slowing economic recovery, and thus reducing risk appetite.

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The crypto market has already reacted excessively to the NASDAQ’s positive dynamics in recent weeks (comparison below), and the corporate event of one of the index’s drivers — Apple — today does not always have a positive impact on the market; more often equities rise on expectations.

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In summary, we have a rather slippery situation — support from stock markets may soon wane, and the fuel for accelerating movement in the form of liquidations of players who have built positions in the triangle is dwindling.

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Undoubtedly, the market often offers surprises, but it is quite likely that the current decline will mark the start of a downtrend.

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