Just as Bitcoin climbed slightly above $ 45,000 on Friday, recycled news about China’s central bank promising to ban crypto trading for Chinese citizens came out, liquidating more than $ 600 million in derivatives positions. at the time of writing.

It’s crucial to remember that large sell-offs tend to cause cascades of forced sell orders, creating a short-term imbalance between supply and demand. In these events, supply exceeds demand and prices fall until the next large supply (supply) is reached.

Despite the short-term volatility, the overall trend of fundamentals and chain measures remains firmly bullish as long-term holders and miners continue to hold. In contrast, the weak hands combined with the “young” coins held continue to panic. Exactly like it happened in yesterday’s draws.

China FUD flushed out weak hands

The recent Chinese FUD on the crypto trading ban appears to be old news that was released on September 3, 2021. Considering the $ 4 billion in liquidations causing an intraday drop of 20% on September 7, 2021, the day that El Salvador adopted Bitcoin as legal tender, the news has already been incorporated.

Wave 2: the price of Bitcoin tries to find a bottom

Recent volatility and large selloffs managed to push BTC to a weekly low of $ 39.5,000 on Tuesday, confluent with a critical Fibonacci retracement level. So far, the technical structure suggests that the pullback from $ 52.9,000 to $ 39.5,000 is a wave 2 corrective wave (according to Elliot Waves).

According to the Elliot wave structure, corrective waves follow a downward 3 wave motion. Technical analysts call this an ABC corrective wave, where A is the first step down, B is a surge, and then C is the last step down.

For the next short term, the price of bitcoin is expected to hold the Wave C low at $ 39.5,000. So far, BTC has rallied and is forming a higher low at $ 40.7,000, a confluent technical support level, which includes the lower Bollinger Band on the daily chart.

If BTC can successfully maintain the low at $ 40.7,000 and start hitting highs above $ 45.2,000, this will further increase the likelihood of completing Wave 2.

Looking ahead, the technical structure suggests that completion of Wave 2 will initiate a larger Wave 3, which tends to be the wave that pushes prices considerably higher. It depends heavily on BTC’s ability to protect the low at $ 40.7,000 and the intra-week lows at $ 39.5,000.

Long-term maintenance of the technical structure

Although the short-term charts look bearish, the long-term charts remain bullish, especially with a larger structure: BTC has managed to maintain support above the $ 30,000- $ 40,000 trading range in June and hit a higher low since the bottom at $ 29.2,000 in July.

Wyckoff Accumulation Extension Phase D

Wyckoff Accumulation seems to extend phase D, which is more of a consolidation phase, before phase E where the price is considerably increased. The multiple rounds of liquidations and the suspiciously programmed FUD brought BTC below $ 50,000.

Trade volume rose as BTC tested key tech support levels in the midst of $ 40,000, suggesting bigger buyers stepped in. Despite a larger-than-expected pullback, BTC still hits a low (on shorter timeframes). To maintain a larger technical structure, BTC needs to hold support between $ 41.3,000 and $ 40,000 on a weekly close basis.

The chain trend remains bullish

The majority of recent sales have come from leveraged closeouts and panic sales of younger coins. The 3 month old and younger coins were the main sellers. Overall, older coins continue the accumulating trend, showing no interest in selling the pullback.

Since BTC hit $ 52.9,000, Miner’s reserves have been slowly trending down, dropping by around 6,600 BTC. It may sound like a large amount of BTC, but it only represents 6,600 BTC out of total miners’ reserves of 1,850,000 BTC.

Bitcoin miner reserves continue to remain above the starting balance in January 2021, showing that BTC miners periodically sell small amounts of BTC, but the overall trend shows no major selling pressure against bear markets .

CryptoQuant’s average coin age metric continues to rise despite the drawdown, strongly confirming that long-term holders continue to accumulate and hold while weak hands sell.

Volatility throughout 2021, multiple liquidation events, constant FUD and deep pullbacks did not have a significant impact on long-term holders. This suggests the HODLers who have held BTC for years become comfortable with their position even with the wild swings and windups.

The type of behavior described, which can be seen on the chain, strongly suggests that long-term holders and entities holding older coins have a strong belief in Bitcoin and are unwilling to sell on large drawdowns. As these entities continue to accumulate, less BTC will be available for sale on the exchanges, which will worsen the deep exhaustion of supply.

This can be seen at spot foreign exchange reserves, which continue to hit new multi-year lows, even with recent volatility. Spot foreign exchange reserves have fallen by 12,500 BTC since BTC hit $ 52.9,000 and began the pullback. Based on this data, it is clear that investors are buying the downside and removing BTC from the exchanges.

Critical weekly closing ahead

It’s important to see BTC stay above $ 41.3k and $ 40k for weekly close. In the near term, we need to see a hold of $ 40.7K to form a higher low as the next step for the completion of the wave 2 withdrawal.

It’s also possible to see other closeouts, which likely send BTC to the low at $ 39.5,000. Going below $ 39.5,000 could send BTC to the next significant support levels at $ 38.6,000, $ 38.3,000 and $ 37.3,000.

This would be a less ideal scenario for the bulls, especially as BTC approaches the critical weekly close. If there is a wind-up wick up to the top $ 30,000, seeing a wick rise above $ 40,000 is essential to maintain a larger technical structure.

Bottom Line: Short-term charts look cautious, but long-term charts and the overall fundamentals and chain trend remain firmly bullish as long-term holders, miners and entities holding older coins show no sale sign. . BTC continues to look well positioned for a strong rally to new all-time highs later this year.