It is surprising to see such a wide range of disagreements in this market when Bitcoin (BTC) has done nothing but follow the previous cycle the whole time. There have been confusions regarding what part of the cycle we had been at during different times, but every now and then it becomes quite clear. This time, BTC/USD has run into the 21 Month EMA just like it did in July, 2015. Also, just like in July, the price has pierced through a long term trend line resistance. Bitcoin (BTC) has also closed above the 200 day moving average which means there is a good chance the bear market is finally lover. However, that does not mean that the price is in the clear to keep shooting up. In fact, BTC/USD has been overbought on the weekly and daily time frames for quite some time now.
The monthly chart for BTC/USD shows that both the RSI and Stochastic RSI are near the oversold territory and the price of Bitcoin (BTC) is due for a major rally long term. However, it is important to realize that this does not mean the price cannot drop further short term. In fact, a sharp decline is exactly what most indicators are pointing to at the moment. Every time the price of an asset faces rejection at the 21 Month EMA, we see a strong decline. We have seen this in the stock market, the bond market and in commodities like Gold and Oil. The price of Bitcoin (BTC) has however respected the 50 month moving average and we expect it to do the same this time unless the price enters a long term bear market, which again remains a strong possibility.
In our previous analysis on Bitcoin (BTC) we mentioned that this is one of the best times in history to be short on Bitcoin (BTC). That is because the price is due for further downside which we expect will coincide with the decline in S&P 500. If the stock market continues to decline and we enter a financial crisis, thing are going to get really bad for Bitcoin (BTC) and we might see it break below the 50 month moving average. If that happens, the price could very well drop to triple digits before it recovers. The reason we say this is the best time to short Bitcoin (BTC) is because the risk/reward is more favorable than ever.
Even if we do not see a strong decline in equities and the stock market recovers and the cryptocurrency market follows, Bitcoin (BTC) would still be down significantly from its current level which would make the short position worth it. The weekly chart for BTCUSDShorts shows that the number of margined shorts has now declined to its trend line support because the bearish resolve is terribly hurt at the moment. A lot of bears with aggressive short positions got liquidated. Just more than $500 million worth of shorts were liquidated on Bitmex alone. Meanwhile the bulls are too confident calling for the next bull run. This is the time when the whales usually pull the plugs and surprise both sides.