Assessing the chances of the last bear market rally for 2022

  • Bitcoin price continues to consolidate around $16,500 supported by the trend line.
  • Investors can expect a bullish convergence to occur when coupled with bullish metrics on the chain.
  • Invalidation of the bullish thesis will occur with a rotation of the $15,550 support level.

Bitcoin price is in a good place to trigger another bear market rally on the higher time frame. This development, along with the optimistic outlook seen in chain metrics, further strengthens the likelihood of a happy ending by 2022.

Bitcoin price and potential games

Bitcoin price shows a descending wedge formation on the three-day chart, which is depicted using trend lines to connect two lower highs and three lower lows. A third retest of the downtrend line is still underway as BTC hovers around $16,500.

As mentioned in a previous article, the price of Bitcoin has made lower lows over the past five months, while the popular momentum indicator Relative Strength Index (RSI) has made higher lows. This divergence or ‘convergence’ is a sign of rising bullish momentum and an indication of a market reversal.

Therefore, investors can see a 17% rise in Bitcoin price and the highest trading volume level of 2022 at $19,011, the Point of Control (POC).

With investors still reeling from the collapse of Luna, Three Arrows Capital and FTX, that outlook may seem hard to agree with. However, if the Bitcoin price turns the POC into a support level, an even more bullish view could emerge.

This development could attract outside investors, leading to a jump in buying pressure. Such a scenario could prompt BTC to challenge and break out of the descending trendline of the descending wedge. This trend line connects the levels of November 2021 and March 2022.

Hence, a decisive three-day candlestick above this block will signal a change in narrative and begin a 54% rally to $32,191. The target for this breakout is obtained by measuring the distance between the first swing high of the falling wedge and the swing low and adding it to the breakout at $20,560.

While the aforementioned 17% move may seem improbable for investors in this bear market, they should not be wary if a 54% rally scenario plays out.

BTC/USDT 1 day chart

The post-Thanksgiving chain landscape for BTC

Supporting this illustrative prediction for the price of Bitcoin is the 24-hour index of active addresses, which rose to 1.15 million on November 20. The last time this indicator reached 1.15 million in May 2022. investors in the cryptocurrency industry are still interacting with the Bitcoin blockchain and showing high activity.

BTC 24 hours active addresses

BTC 24 hours active addresses

Taken alone, the active addresses metric means nothing, but when combined with the Supply Distribution metric developed by Santiment, the two paint a more complete picture. After the accident on November 22, the “whales” are showing strong signs of regrouping. In the last three days, the combined balance of 100 to 10,000 BTC addresses has increased by about 60,000 BTC, indicating that these investors are clearly buying the cheapness.

BTC supply distribution

BTC supply distribution

Interestingly, the keyword ‘buy the dip’ does not have the same momentum on November 22 as it did during the November 10 crash. This decline in the Social Volume metric suggests that retail investors were burned during the second downturn on November 22.

Combining this knowledge with the fact that hoarding is seen in whales holding 100-10,000 BTC, one can assume that this is a transfer of wealth from weak hands to strong hands and “smart money”.

BTC social volume

BTC social volume

To summarize, year-end rally is in the making for Bitcoin price. Whether it’s a 17% rally to $19,011 or an explosive move to $32,191, investors should be prepared.

On the other hand, if the Bitcoin price fails to react to bullish indicators and closes on a three-day or weekly candle below the $15,550 support level, it will invalidate the bullish forecast. This development will sow fear in the minds of investors, creating a lower low and triggering a selling frenzy.

In such a situation, investors can expect Bitcoin price to revisit the support area that stretches from $13,575 to $11,898.

Source link