Range-Bound Bitcoin, Opportunity or Bull Trap? (July '21 Outlook)

Technicals & Trends

In the short run, BTC could very well trade in a range, or even slide if we see another bout of selling pressure. Just about everyone we talk to is *not so* secretly hoping for another leg lower so they can accumulate, which leads us to believe any sell-off below the mid-to-high $20k range is likely to be somewhat short-lived.

Bitcoin is still trying to fight gravity and the morbid consequences of confirming an extensive head and shoulders pattern, which, as we’ve noted, would imply another major leg lower. We continue to monitor $30k as the key level to watch in the coming days and weeks.

Interestingly enough, BTC broke below its H&S neckline intraday but price didn’t break down as expected. With sentiment largely still fearful, a bottom could be close if bitcoin continues to defend the ~$30k level; the Crypto Fear & Greed Index has been below 30 every day but two since mid-May.

This isn’t just a story about BTC versus USD though; BTC against emerging market currencies (EMFX) is also retesting key support.

Bitcoin also experienced the inevitable “death cross” recently, where its 50-day moving average crossed below its 200-day equivalent. Historically, this is a bearish signal, but BTC has a tendency to rebound (sometimes quite dramatically) in the days / weeks immediately following the event.

While we don’t foresee a multi-year bear market on the horizon, BTC’s recent setup has several similarities to April 2018, just a few short months following bitcoin’s December 2017 peak:

• BTC started trending lower following its parabolic move to a fresh all-time high.
• Price fell below its 200-day MA, followed shortly by an infamous “death cross”.
• BTC bounced off its 50-week MA before falling below ~5-6 weeks later.
• BTC initially found support near its 12-month MA before dropping under.
• The 200-week MA wound up serving as key support (currently ~$13,700).

Just to be clear, we don’t expect BTC to suffer such a dramatic slide, but the similarities are noteworthy nonetheless.

In a prior note back in April, we highlighted the significance of BTC’s sixth consecutive month of gains and how, historically, price tended to disappoint in the months immediately following. This is just another sign that price got a bit ahead of i