[...]Between $35K and $40K things could really get interesting as sellers would again be trapped under $32K which we've seen twice before in January and Summer of 2021.[...]
Thanks for your analysis. To a non-trader, could you eleborate a bit about sellers trapped under (Adam's magic) $32k?
Firstly, I should point out that (for whatever reason) the coinglass chart was updated and the number of shorts shown in quoted chart never happened
It now shows
only $100m short liquidations, as opposed to the $800m screenshot. I guess there must of been some sort of bug that was fixed and changed the data...
As to your question that I didn't elaborate on, sellers being "trapped" at lower levels generally implies that they become forced into buying at higher prices, pushing the price higher than anticipated. So for example in 2018/2019 when price dropped from $6K to $3.2K, those who sold the breakdown from $6K had the opportunity to buy back in at $4K, $5K, even $6K. They didn't get "trapped" selling at a low price and having to buy back higher, unless that was their intention. Again in 2020, with covid crash and price dropped from $6.5K lows to $3.8K, those selling the lows did have a few weeks to buy back into the market for the same or lower price.
This time around, breaking below $33K-34K more of less invalidated the higher low and higher high price structure from the past 18 months, ie a bull market structure, so for many the anticipation would have been price dropping in half approximately, or at least to the 200 Week MA, similar to 2018 and 2020. Similar can be said for the $29K level, breaking macro support, and therefore anticipating lower prices. Because this is usually the
most likely outcome, but this doesn't mean it will always happen.
The bear trap occurs when price doesn't reach the targets the bears were hoping for; generally low $20Ks, even $12K-14K for others. For some, selling is simply to sleep better at night, to avoid the negative volatility, to reduce risk, not necessarily in order to try and buy back at lower levels. Obviously selling at say $33K and buying back at the same price can seem pointless, but obviously not
if price drops to a much better price. But this still looks like a big if right now.
Notably Bitcoin has generally been relatively trap free for bulls & bears, based on macro price movements, until late last year when we had the huge bull trap above $65K. Probably the first ever macro bull trap, as previously when price made new ATH, it would would continue rising. So far, the same sort of dynamic has occurred as late last year, price breaks major support or resistance (in this case $29K support), but failed to sustain momentum after passing this level. To me it seems very similar to breaking resistance around $60K (as well as ATH), but then failing to sustain the momentum.
So if price get's back above the capitulation level of $34K, many previously confident sellers are forced into panic buying in the $35K to $40K range, in order to avoid being left behind. Arguably the same can be said all the way up to $45K, when price originally fell below the 50 Week MA. This is based on the theory that many (probably most) selling these bear market confirmations aren't giving up on Bitcoin, but more so anticipating or hoping for lower prices. Or reducing their risk with the intention of increasing it when price turns around.
There will be some remaining buyers that will feel trapped around $40K (main accumulation/distribution zone) as well that will likely want to sell. But just like in 2019 as well as 2020 with $6-8K main accumulation zone, the $40K level is more likely to act as a price magnet than resistance. Similarly last year $48K to $50K was the main accumulation/distribution zone, but price broke above and below with relative ease.
This theory is generally why I'm not expecting much else but "sideways" trading between $30K and $60K for the rest of year, if price can get back above $34K capitulation level, which would also be good for building long-term momentum. Trapped sellers would be buying back into the market from trapped shorter-term buyers, or late longer-term profit takers, without much new liquidity coming into the market.
Hope that rambling analysis helps explain what I meant
Poll
