Bitcoin Tests Critical Support as ETF Outflows Accelerate December Decline
Market Structure Shifts Lower
- Bitcoin’s price dropped this month by 15.6% recently reaching a level just above a key support level that could lead to further losses.
- The outflow from BlackRock’s $523 million exchange-traded product appears to have clinched the argument for institutions, at least in the near term.
- Moreover, prices pulled back from December’s $108,000 resistance area last week after the U.S. Securities and Exchange Commission delayed another decision on a Bitcoin spot exchange-traded fund.
The similar counterpart in the Metaverse – MANA, could also be seen attempting a rather wild recovery this week as the token’s price forged a stunning 40% surge from intraday lows. Reacting off the previous resistance, bulls will have to find a way to keep the asset above the 200-D therefore its bounce of the shorter moving average will likely be determined pretty early on. If bears do manage to retake control from the bulls, the first line of defense is expected at the already flipped former resistance band of $3.22-$3.33 and from there in the neighboring golden pocket.
| Metric | Value |
|---|---|
| Asset | BITCOIN (BTC) |
| Current Price | $91840.34 |
| Weekly Performance | -10.87% |
| Monthly Performance | -15.57% |
| RSI (Relative Strength Index) | 29.6 |
| ADX (Average Directional Index) | 39.1 |
| MACD (MACD Level) | -4634.41 |
| CCI (Commodity Channel Index, 20-period) | -140.72 |
RSI Drops to 39.32 – First Oversold Reading Since August Washout
The oscillator is reading 39.32 on the daily timeframe and for many this is the first truly oversold since August’s liquidity capitulation. The RSI index fell below 40 for the first time in four months as the pickup in ETF outflows and removal of dealer hedges triggered some extreme momentum. Most concerning is how quickly the indicator dropped from December’s overbought reading above 70. A 30 point swing in two weeks almost perfectly mirrors the 30-point two-week downward swing in July/August and SeptemberWhich-Is-The-Fastest-Market-Correction-In-History.
Almost identical RSI set-ups in September led to a 28% relief rally after selling was exhausted, but it took three weeks to develop as the RSI became more extreme. As a swing trader, this balanced RSI reset gives room to either a relief toward $98K R1 resistance or lower if ETF outflows continue. The main variance this cycle is that institutional ETF flows now dictate price discovery, so oversold bounces are less trustworthy when BlackRock customers are net sellers.
ADX at 39.1 Confirms Mature Downtrend Gaining Steam
With the ADX (average directional movement index) trending over 39, we’re no longer surprised that stocks are moving away from the equilibrium levels forecast by the put-call ratio. A high ADX, which indicates the strength of the trend, tends to coincide with stocks stretching as far from their 10-day moving average as possible. It continues…
In simple terms, the ADX suggests we are in a state of the market where better risk/reward is found in trading with the new trend rather than against it. While counter-trend day trading can be highly profitable in flat momentum environments, the current momentum is so strong that it can be quite risky to try reversal trades. Most successful day traders are long-biased at the moment. But there is still money to be made on the short side as countertrend traders seek to quickly exit their losing positions as stops hit and the shorts protecting against potential mass liquidation cover.
Former Support at 100-Day EMA Now Caps Recovery Attempts
The 200-day EMA, which has not even been tested as support during this bull market, is all the way down at $67K. Although anything is possible in these wild crypto markets, an immediate retest of this level on any pullbacks seems improbable.
The important thing is the squeeze between the 100-day EMA at $90.7K and price at $91.8K – that’s less than 2% apart. Apparent price indirection tends to revert into a dynamical push in the direction bulls or bears require in order to reset balance, and that 100-day average is often the level around which this zero point occurs. The last two will likely be missing – sideways and across isn’t a common escape.
$90K-$92K Zone Becomes Battlefield After December Rejection
There’s strong support forming around the February monthly pivot at $92.6K with a number of technical levels aligning in this region — the daily 200-period MA at $92.9K, monthly S2 at $91K, and yearly open around $90K are all in the vicinity. Another technical factor to consider are the wicks on the underside of the past week’s candles; these long wicks are indicative of price rejection, suggesting that at certain levels buyers are indeed stepping in.
The bulls are defending the support cluster between $90K and $92K, where the 100-day EMA converges with horizontal support from September’s consolidation range. This level has now been tested six times since June and held on each test, bolstering the rationale for strong demand here. We might also note that the launch of New Hampshire’s Bitcoin-backed municipal bond could offer a counter-narrative to the ETF narrative, insofar as institutional adoption themes come back into focus.
The market structure tells bulls this is their last chance to continue the trend higher without major trouble. They need to keep the $91.8K level defended on any retracement if bulls lose the battle, the monthly S1 pivot sitting at $82.8K will be the first logical target.
Bulls Need Daily Close Above $98K to Stem ETF-Driven Bleeding
If price manages to climb above the 50-day EMA, many swing traders may view this move as a potential trend reversal, which could create enough bullish momentum for a test of $110K, offering bears who missed the short setup an opportunity to add to their positions.
A bear market is defined by structured lower lows. The first domino in the cascade sequence is a break of the $90K support cluster on volume. In pursuit of stops placed by recently battered traders, the other non-strong hands react to price devastation. If the April 2021, parabolic breakout level and 100-day EMA succumbs to bearish fervor, the most obvious target is the monthly S2 pivot located at $82.8K. However, liquidations could easily run down the $80K figure if the selling truly accelerates.
Due to the technical damage of the December rejection, ongoing institutional outflows, and year-end liquidity dynamics, the most probable near-term is further consolidation between $90K and $98K, which would allow the oversold daily RSI to reset. This would give time for the market to digest the ETF redemption story and wait on potential catalysts to improve sentiment such as Bitfury’s $1B fund announcement over the holidays or more bond initiatives backed by Bitcoin.
