Bitcoin Technical Analysis
Bitcoin has been languishing in the $38K to $40K range the last few days. Most of 2022 so far, has been boring, with Bitcoin going sideways between $36K and $45K. This could continue for a while longer before a breakout of this range is realistic. This blog will explain using technical analysis. Keep in mind. When Bitcoin is boring, that is when you buy into it, or invest in Bitcoin miners!
First we will look at the VIX index. The US volatility index or VIX ended last week at 28.96 which is not too high. It can get over 80 like it did when the corona virus crash happened 3/2020. If it goes higher and the S&P drops that would likely help Bitcoin. However, some factors we will look at further down are the main culprits for why Bitcoin is grinding sideways, or up down up down. Below is the VIX S&P 500 comparison chart:
As for Bitcoin, it’s volatility index is up and down. The uptrend in Bitcoin volatility lately combined with the next couple of charts is a good thing. Here is the volatility chart below:
We showed this chart last week but it is important. Bitcoin is coming off of exchanges largely because of the hostility towards online exchanges. Many exchanges have been asked to rat out who owns Bitcoin on their exchange. Canada, and the US have done this. They have been unsuccessful so far but Kraken, Coinbase have warned not to leave coins on exchanges for long. Just to transact. Offline Bitcoin is seizure resistant. Only the exchange sits between the government and the owner of the Bitcoin when it sits on an online exchange. Thus the importance of keeping all Bitcoin offline. Now, this chart below is important because more and more Bitcoin owners are heeding this advise and getting their Bitcoin offline. As this happens, we believe scarcity of Bitcoin will increase and eventually a supply shock will ensue. This supply shock has been delayed substancially, because there is only a Bitcoin Future’s ETF not a Spot ETF approved by the SEC. See the chart below:
The more Bitcoin that goes offline, the less derivatives markets have access to Bitcoin to short it in the futures market. Basically, Bitcoin derivatives have created this 11 month long accumulation time period which help retail investors get affordable Bitcoin before this aforementioned supply shock hits. The next chart is Percent Futures Open Interest Crypto-Margined. That means the collateral is Bitcoin not a stablecoin. By having Crypto-margined opent interest, it puts actual Bitcoin at risk since that is the collateral. From this chart we can deduce that Bitcoin is strengthening while less and less Crypto-margined open interest is available. The margin is on stablecoins, not Bitcoin. That could point to a reversal at some point. Bitcoin going offline, open interest margin using stablecoin, not Bitcoin. Here is the chart below:
Every 90 years or so a new super power comes along largely because their currency becomes global reserve currency. At some point as Bitcoin ascends and more and more nation states have Bitcoin deemed legal tender. Bitcoin will ascend to a super power level with no country associated with the currency. This could take over a decade. We have shown the global macro trends on how decentralization away from central banks and governments is being highlighted today in Canada and with the US and Europe removing Russia from the SWIFT banking system. Weaponizing the dollar! This will hasten the end of the USD as global reserve currency.
It makes having a peer to peer digital money system that is decentralized and seizure resistant that much more important. The world is waking up to that fact, slowly. Here is the chart below: