Is The Bottom In?

Good day Hiveians!

Join me in analyzing the crypto markets!

 

There is one indicator that screams "bottom"

...and it is volume. Before looking at this metric, I first want to highlight the last post in which I argued that 12k BTC is still very much on the table. But since this is just one of many scenarios it is important to try and look at all of them objectively. As such, the crypto bear market bottom could also very well be in with the recent dump to around 15k. While most other trend lines and metrics failed to highlight the potential bottom, drawing trend lines on the weekly chart has proven to be rather successful.

So far price has held at exactly the 15-16k range which the most recent tend line suggested (note that almost nobody called for this range of support, with 12k being in the news). But again, I showed in the previous post that price has generally gone under this support one last time before the bottom was in.

When we look at volume the exchange is also of importance. For example, Binance several months ago introduced a 0 trading fee for BTC which greatly contributed to BTC being moved to Binance. The volume there exploded. We have to keep this in mind when looking at the Binance chart. But lets start with Coinbase since this is still a top exchange with a lot of volume.

There are a couple of interesting points here. First, note the obvious upticks in volume whenever there was a big sell off (marked with the blue arrows). Second, there is a very curious detail: In 2018 the volume in the bear market dropped significantly (as is general the case for bear markets). But in 2021/22 in the current bear market volume actually increased significantly! I am not sure why this is the case; although it obviously points to the fact that people traded BTC in greater numbers. This could mean that the interest in BTC seems to be much higher today and increased during a downward trend in price than in the last bear market. Bitcoin isn't going away as its critics always suggest in a bear market. Instead, interest seems to be at an all time high!

Importantly, the sell off in terms of volume was the highest on record for the recent dip to 15k. Even with an increasing volume this is significant. Bear markets always end with a volume explosion. While this does not mean another higher volume uptick is coming, it certainly satisfies the requirement for a termination of a bear market.

The Binance chart is off the charts so to speak.

One can clearly see the uptick in volume when Bincance introduced the 0 trading fees there. But look at the weekly volume: 3.2M! Coinbase only had 400k in the same week. This is an 8x in greater volume.

Conclusion

While volume is just one indicator of many to look at while trying to determine the bottom of the bear market, it is a very important one. The sell of in the last weeks certainly points to the possibility of a bottom - or at least being very close to it.

 

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As a general reminder: Please keep in mind that none of this is official investment advice! Crypto trading entails a great deal of risk; never spend money that you can't afford to lose!

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