Bitcoin Tests $86.7K Support as Institutional Demand Overtakes Mining Supply
Market Structure Shifts Higher
- Bitcoin is holding steady at $86,769 after dropping 5.78% over the week
- Institutional buying is offsetting some bearish pressures
- Technical support remains intact with the RSI falling to 39.96 on the daily chart
- The testing of $85,660 support comes as Exchange Traded Fund (ETF) allocations transition from trial-centred business to consistent methods
Bitcoin’s price followed the same pattern this week, landing at $86,769 down 5.78% and about $5,200 from recent peaks. The retreat came as institutional demand exceeded mining output for the cycle’s initial time and the shaky inspiration of this technical position fulfills the definition of a firmament. Substantially oversold and supply-shortened dynamics to give us another explosive move in the room or would a potential MSCI delisting valve better reveal additional room for the downside?
| Metric | Value |
|---|---|
| Asset | BITCOIN (BTC) |
| Current Price | $86769.88 |
| Weekly Performance | -5.78% |
| Monthly Performance | -5.69% |
| RSI (Relative Strength Index) | 40.0 |
| ADX (Average Directional Index) | 17.5 |
| MACD (MACD Level) | -1861.55 |
| CCI (Commodity Channel Index, 20-period) | -135.92 |
RSI Drops to 39.96 – First Oversold Reading Since September’s Pre-Rally Setup
With growth rates that doubled those of the automobile industry and the global GDP respectively, practically nobody could have foreseen that this trend would develop so quickly. Likewise, very few understand how the appeal of Bitcoin and cryptocurrencies in general is intertwined with their potentially subversive implications for sovereign nation-states. On the one hand, we’re seeing the further centralization and marginalization of the local banking sector. Many governments around the world who have repressed countless tons of gold over the years now face the nightmare scenario that individuals seeking a truly stable asset might eventually lose faith in national fiat. Bitcoin’s unearthly supply elasticity is set against a backdrop of record net long speculative positions and a hesitant Wall Street. Checkmate.
This oversold RSI in conjunction with institutional buyers absorbing more Bitcoin than is being mined daily is a powder keg setup for swing traders. The last 3 times daily RSI touched the high-30s zone Bitcoin rallied an average of 38% in the following 6 weeks. Obviously, we are starting from a much higher price level this time, and the MSCI threatening to come down on Bitcoin provides a wild card the previous oversold bounces did not have.
ADX at 17.54 Keeps Range Traders in Control While Trend Builds Beneath
The ADX entry at 17.54 shows us there’s a weak bias either way – so in other words, there isn’t a strong current trend in the market lower despite the recent selloff. When in this zone, bulls and bears are too evenly matched to make a strong push in either direction, which in turn makes sense as to why price action continuously bounces between $85K and $93K per yada rather than breaking out decisively. The majority of the time, the pre-trend compression phase will get resolved in a violent move once ADX pushes back above 25.
When the breakout finally materializes, it should be a good one. VWAP analysis suggests that most holders of Bitcoin acquired their positions above current price levels; this doesn’t guarantee that they’ll sell into rallies to escape baggage (many pre-December 2020 holders are up over 1000%), but it suggests there is latent selling interest clustered overhead. Most of these Bitcoin are held in addresses that are roughly 20-30% in the money, so call options are likely concentrated in the $15k-30k range.
20-Day EMA at $89,696 Becomes First Resistance After Supporting December Rally
When US markets closed on April 2nd, Bitcoin was in the process of retesting the 10-day and 20-day EMAs as resistance for the first time, and the 50-day EMA was still acting as support. However, with the advent of a fresh week of trading and Wall Street’s doors reopening, the benchmark cryptocurrency has continued to plunge.
One interesting aspect is that the 100-day EMA is offering fairly solid support at $78,557, although it’s almost $8,200 below the current price. In general, closing below the 100-day EMA often results in a retest of additional levels, notably the 200-day EMA. The $89,700 region is the previous support zone and is currently flipping to resistance. A push through this zone would indicate that the correction has ended as the next resistance area then comes in at $105,500.
Support Architecture Builds From $81,694 to $85,660 as Institutional Bids Stack
The closest support between $92,321 and $90,539 is equally strong, indicated by the convergence of the 10-week EMA and the 200-day EMA on the monthly pivot levels. This week’s selloff has only added to the already overbought momentum levels, reinforcing the strong resistance levels and acting in lieu of an over-extended consolidation. However, the deepening negative RSI divergence is hinting that the correction before the next rally might be in terms of a price decline rather than time spent churning.
Bullish investors are increasingly confident as institutional buying is more significant than the supply of newly mined coins. The primary support level is $85,660 (monthly S1), which the price has rebounded from on three occasions since the new year. Below this, we have the secondary support at $81,694, which is the monthly S2 pivot, and the $80,000 flat level. Each test of support is being done on more exceptional volume, which implies the buyers are real and not just shorts taking profits.
The current state of the daily chart is a close approximation to a classic accumulation structure – weak hands are depleted above while strong hands confidently accumulate below. This stabilizing phase between $85,660 and $93,983 will likely lead to a breakout in the not so distant future. With ATHA’s implied volatility rising, the eventual move could be substantial. Given this compelling pattern, the timing of the catalyst may be answered before the charts alone indicate.
Bulls Need Close Above $89,696 to Negate Bearish Structure
If the price can close reclaim the 20-day EMA at $89,696 on a daily basis, it marks the initial step in overturning the bearish bias. Subsequently, the $93,983 level needs to be breached for Bull’s to push the price higher. A rally above this resistance can open up the road for a retest of the December highs at nearly $99,000. The institutional supply shortage can act as a fundamental catalyst if the technical setup is favorable.
If $85,660 fails and sellers gain control, the next target is $71,000, the January high, which could drop to $64,850, the previous peak, as downside objectives. Sell-stops may amplify the decline if bears are winning. If the market structure is altered by an MSCI exit before July, the losses could easily exacerbate towards the $42,000 drift-continuation target.
Technical compression, oversold momentum readings, and a fundamental picture where demand remains well in excess of supply make continued consolidation between $85,660-$93,983 the most probable near-term direction before attempting a thrust higher. The wildcard continues to be how the market digests the potential MSCI changes – that $15 billion overhang will either push players below technical support or be vigorously front-run by players convinced of the supply/demand picture.
