Trader Outlines Bitcoin’s Medium-Term Outlook

The current market picture is explained by a practicing trader and founder of the project Crypto Shaman Vadim Shovkun.

Bitcoin has been range-bound for three months, and there is a possibility to form a mid-term assessment of the most likely price path. Because the correlation between the first cryptocurrency and the S&P 500 is nearly 1:1, the greatest attention should be paid to the latter.

S&P 500

The previous analysis of the S&P 500 has been playing out. The price has had a modest bounce up and then moved to the projected decline.

The horizontal volume profile (the blue histogram) clearly shows that all traded volume sits in the upper part of the chart, essentially at the peak. In other words, it was at the top that aggressive unloading of long positions accumulated during the March 2020 dump occurred.

This indicates that large players were aggressively closing longs and opening shorts in the $4320-$4500 area.

The June 2022 rebound occurred without volume (blue zone). There was no buying pressure in contrast to the traded volumes at the top. In other words, the short positions accumulated in the $4320-$4500 region remain open.

The peak of growth in early August can be characterized as a retest of the area PoC. The price failed to break through the key region, which can be described as sellers defending their held positions.

The next interesting zone sits around $3368. This is the second-largest cluster of volume formed after the COVID dump. By the classical law — the market moves from volumes — there one should expect at least some reaction.

Analyzing the daily timeframe, at the moment there are no reasons to expect a reversal or a quick new highs, or at least a move into a sideways accumulation. Large players have accumulated a very large number of shorts in the $4320-$4500 region and defended their positions in August.

After forming a defined range around ~$3368 it is logical to expect further decline in the coming weeks and months.

Bitcoin

On the three-day chart a clear descending wedge has formed. After three months of flat trading there was an attempt to move out of the wedge, ending in a false breakout. Wedges rarely play out via flat; typically, moves preceding a breakout from this pattern are impulsive.

Analyzing the bounce after the June dump, one can conclude that the main traded volume ran along the highs (according to the volume profile). A major player is still trying to hold the first cryptocurrency from attempts to rise.

Conclusion

Bitcoin is exposed to a multitude of factors. A major threat to the market is the inflated capitalization of several stablecoins. But the facts gathered through technical analysis of the charts are sufficient to declare that mid-term downside for Bitcoin is not yet over.

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