Bitcoin is Rudderless

Bitcoin Bounce

Bitcoin hit a notable low of $80k on 21 November, marking a key support level that influences current market sentiment. Last week, at the close of trade, bitcoin had rebounded 14% from that low.

Are buyers back in control, or will selling pressure limit further upward momentum? Is the rebound sustainable, or is the rebound a dead cat bounce?

Volatility remains relatively high, and the volatility increase associated with the recent sell-off is, not surprisingly, the most significant expansion in volatility this entire cycle.

The market has absorbed significant selling pressure, and volatility will likely reduce, allowing the price to stabilise before the next directional move.

So what will be the direction of that move?

As noted in our previous post, a cascade from $100k to $80k was likely to happen quickly.

Not many investors accumulated in the $80k to $100k zone, and that zone would act as an air pocket.

We also noted that the $80k level, from a probability perspective, is likely the low. (The cost basis for Strategy is $80k, and the cost basis for IBIT holders is $79k).

While volume-based metrics suggest support for the rebound, confirming a reversal requires a break above $93k, which is critical for trend validation.

Sentiment and positioning in spot Bitcoin ETFs have improved; however, bitcoin price action remains out of step with broader macroeconomic signals and the broader financial markets.

At first glance, BTC seems to be pricing in negative macroeconomic signals with no offset from positive ones.

That disconnect adds a further level of challenge and complexity to short-term price action analysis.

Bitcoin Signals Bearish

That said, on-chain analysis and price action structure remain bearish despite oversold technical indicators.

Liquidity issues persist, suggesting the bear market is not over despite a short-term rally. The current bounce may be a bear trap designed to liquidate shorts.

Monitoring volume at this point may provide helpful insight. Low volume could signal a trap.

Increased buying activity within the spot Bitcoin ETFs will be critical if the rebound is to gain momentum.

How the market responds at the $93k level will determine the direction of the bitcoin price action.

The balance of probability suggests that any rally will be capped at $93k. If that is the case, then a reversal back to low $80k levels becomes almost inevitable.