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The Rise and Fall of Bitcoin from a Price Action Technical Analysis Perspective

Seems like all the self proclaimed charting experts are suddenly appearing to claim that they "knew" that Bitcoin (ticker BTC) was going to top out and make the free fall that it did... Not so fast my friends!

For well over the past year traders have been asking us what we thought about Bitcoin and our honest answer has consistently been "it doesn't matter what we think about Bitcoin but what's important is what story the BTC chart has been telling us... You just have to know how to listen to it and pickup on the clues that it provides."

Wasn't that long ago when all the crypto enthusiasts were calling for and claiming they were all in until $100K...  Well how did that work out?

Down over 70% since last Thanksgiving... let that sink in.

It was the first week of December 2021 when we first identified and published divergence on the weekly chart.  Traders who have completed the ChartPros Price Action Mastery Course learn how to identify and trade these conditions and while there's never any certainty when it comes to price action this was certainly a "warning shot" that price could potentially fall and fall fast because as price continued to rise momentum was quietly falling as shown in our chart from December 2021.

Bitcoin top was screaming divergence on weekly chart

As price made what appeared to be "normal" retracements based on Fibonacci drawings the hardcore Bitcoin traders made bold movements by "averaging in" and buying more.  Seemed logical at the time but the traders we spoke with were driven more by emotions than the technicals.

As price retraced to the $40K area price made a move back to the upside and all the so called experts were once again resoundingly calling for $100K...

Bitcoin $40K bounce

Once again all was good in the crypto space and people were making tons of money at least on paper for the investors and in reality for the traders.

But now from a technical perspective the Bitcoin chart had two sided price action, meaning there was actually structure to the left and price wasn't continuously making new all time highs every week.  Traders were salivating while the investors were anguishing and for the first time people like us began to actively trade it with confidence and consistency.

Bitcoin's two sided price action

As priced seemed to ping pong along and trade up, down, and sideways for a while the enthusiasts were still exuberantly calling for $100K+ however the chart was indicating otherwise in the form of a "bear flag" as clearly charted above.

At the time we were bombarded with questions and chart requests because "Bitcoin price couldn't keep falling could it?"  Well it could, and it did.

And while it was a surprise to many, it was no surprise to us when price continued to fall in a very technically oriented fashion.

Bicoin's race to the exits

At this point it was a race to the exits as Bitcoin investors were trapped and wanted out and the irrational expectations were burst by a dose of reality.

But still there were some hanging on and waiting for "the bounce" that still hasn't come.

Where's the dead cat bounce?

So now surely the "dead cat bounce" would come right? Technically speaking yeah sure price could do anything here but market sentiment driven by events like the FTX bankruptcy can often bring different results.

We continued to receive chart requests for Bitcoin and those who know us realize that we don't make predictions, we don't call tops or bottoms, we simply create levels of interest in both directions based on 5 Price Action Tools that are native to every charting platform out there.

So one of our more recent charts posted on October 5, 2022 identified specific levels in both directions so to be blunt no, we are not surprised where Bitcoin is trading now.

Bitcoin bidirectional levels of interest

So now that Bitcoin is sub 17K where could price go from here?  Anywhere it wants to... 

All kidding aside this chart has been a classic case study on how emotions, greed, fear, etc can make or break financial success.

Where could Bitcoin price go from here?

Personally, as a trader we don't care what price does because at the end of the day it's just another tradable chart to us. 

This last chart includes many levels of interest in both directions.  And again, we don't make price predictions, we don't call tops / bottoms, we simply react to price as it moves to or away from our levels.

We've had both winning and losing trades on this chart but ultimately have made more than we lost and at the end of the day isn't that what trading is all about?

If you like this Market Insights article would you mind sharing with a friend? Maybe post to your social media?

In any event, we'd like to hear what you think about Bitcoin so leave us a comment!

 

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