Diminishing Volume Indicative of the Potential for Bitcoin (BTC) to Reach a Fresh Low
With Bitcoin making new highs, bullish sentiment is rife within the space as many have once again called this the end of the corrective cycle. Volume, however, has been in decline since July 2019 and the technical structure of bitcoin looks more and more like the descending triangle that formed over the course of 2018, reported by Forbes, January 7, 2019.
Maintaining Composure Amidst Exuberance
Bearish price action is always accompanied by Bitcoiners deeming it “accumulation time” while bullish price action is supplemented by more of the same. Either way, nothing can separate a Bitcoiner from their impassioned confidence that price will one day break the $20,000 barrier from 2017.
There is no doubt that in light of recent economic and geopolitical events, Bitcoin has a bright future ahead – but that doesn’t mean it has a bright tomorrow. Volume in decline implies fewer people are trading bitcoin. If this is truly the case, moves to the upside like this are by no means sustainable.
Less volume moving price is not just unsustainable but symptomatic of orchestrated moves by whales. Despite the amount of credit we give whales for moving markets, the peak of euphoria where bitcoin goes absolutely parabolic, gaining multiple percentage points per day, is when the market is exploding with retail traders. Volume is an important metric, and increasing volume will be a tell-all signal that things are starting to look up again.
The Bull Case for Bitcoin
Bitcoin is not going anywhere. That is very, very clear by now. As a network, it is resilient to censorship and sufficiently decentralized that regulatory actions from any set of jurisdictions will not manage to ‘kill’ the network. As a market, bitcoin is incredibly liquid will multiple billion dollars worth of legitimate volume per day.
According to Elliot Wave theory, bull markets come in waves of 5 where waves 2 and 4 are pullbacks and 1, 3, and 5 are the moves going upward. Wave 1 is usually a small consolidation followed by a quick pullback, and waves 3 and 5 have the ability to take market ballistic. The general trend in bitcoin is for volume to show up on wave 3 and price to massively explode during wave 5.
So an uptick with low volume could still be bullish for bitcoin. The takeaway from this is not get caught up with the noise until there is concrete evidence that demand is back and the bottom has been cast in stone.