Bitcoin ($BTC ) has been in a downtrend for the past six months, and while this may not be immediately evident when examining shorter time frames, a glance at the monthly chart reveals a clear pattern. Both the upside and downside wicks have been consistently lower, and we have seen a series of lower lows and lower highs since what now appears to have been a false breakout.
If BTC breaks downward again, it could fall through the level I marked as the critical break level during its high. You can read my earlier post on this here: Real make or break level for BTC now. If BTC could break this downtrend, it would be a very bullish signal, but failure to do so might suggest we are nearing a significant downturn.
Over the past six months, there may have been a period of "baiting" â a strategy to lure in bullish investors before a turn downward. If this is indeed the case, we might be approaching that turning point now.
Recent Trades and Market Analysis
Trade activity has been notable recently, particularly after a spike at the end of last week. I have taken several BTC positions with entry points primarily around the 64K mark. This decision was based on a comprehensive analysis, which I have detailed in a separate post. It outlines a roadmap for a full bear trade, assuming that the high is indeed set and the downtrend continues to develop.
Another significant observation is that the bullish pattern in MicroStrategy (MSTR) has failed as well. My earlier post from the MSTR low had forecasted a bullish breakout move, and while the trade initially looked promising with a 50% gain from the entry, it ultimately did not break out. The failure of this bullish move in MSTR could be an indicator of broader market sentiment, which does not bode well for BTC.
The Impact of ETFs on BTC
Whenever I mention a potential bubble in BTC, someone inevitably brings up Exchange-Traded Funds (ETFs) as a counterpoint. However, I argue that ETFs are not a counterpoint but rather a supportive element of this narrative. Looking at the history of ETF launches, about 700 out of 1,000 have coincided with asset class highs. This does not necessarily prove a bubble, but it does suggest that enough market interest exists to justify setting up and marketing an ETF to collect fees.
Moreover, the creation of a secondary market via ETFs could increase the chances of a speculative panic if BTC begins to sell off. If a significant amount of volume is handled in the secondary market (ETFs) rather than in the primary market (direct trades in BTC), we could face issues later. The secondary market is much more liquid â investors can buy and sell ETF shares instantly, without dealing directly with the underlying asset.
However, this liquidity in the ETF market does not translate directly to the primary market. If there is a panic sell-off, there will be a flood of sellers in the secondary market. These sellers may not care about BTC itself; they are merely betting on price movements and can be very fickle. This situation forces the ETF to execute large block orders in the primary market, potentially causing an imbalance of supply and demand. Such an imbalance can lead to a sell-off in the primary market, which could then trigger more selling in both markets â a classic recipe for a capitulation.
In conclusion, while BTC has shown resilience in the past, the current indicators suggest caution. The confluence of a six-month downtrend, the failure of bullish patterns in related assets like MSTR, and the complexities introduced by ETFs all point to the possibility of continued downward pressure. Investors should remain vigilant and consider these factors when making trading decisions.
