Bitcoin: 10K Is Coming, But When? Consider 2 Scenarios.

Bitcoin 10K in two weeks? Originally, we were anticipating 10K by December, boy things change fast in this space. There is now plenty of fundamental and technical support for this case BUT the main thing to remember is ANYTHING can happen. Bitcoin order flow can unfold in countless ways and even though 10K is now within reach, it is a mistake to expect a precise scenario to get there. Price is poised to break out of the current range, BUT the possibility of retracing to the 7K area is just as likely. So what is the best way to navigate this situation? Prepare for multiple scenarios.

Respecting Higher Lows.

While there are many calling for Bitcoin to revisit 4500, we strongly believe that scenario is a very low probability. Price structure is the key here and as long as it continues to establish and respect higher lows, new highs are more probable.

The most recent higher low was established around the 6500 area along with a shallow higher low (consolidation) around the 7600 area. Higher lows represent a market that is full of buyers and they often lead to higher highs.

In order for a retrace to 4500 to become a reasonable possibility, price would need to close below 6400 decisively. Unless the market provides such confirmation, expecting a retrace even to the 5K area is like expecting rain in a desert.  Many analysts who are calling for such a low probability scenario are most likely seeking attention, or revealing their chronic inexperience.

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Structure Increases Chance Of 10K Target.
Bitcoin: Infinite scenarios, here are two we are watching for.

Price forecasts are best considered as probabilities, NEVER absolutes. There are an infinite number of scenarios as to how price action can go from here to 10K or NOT over the next few weeks. Let’s review only two bullish possibilities. These are scenarios we watching for in order to enter new swing trades long.

Scenario 1: Shallow Retrace And Squeeze.

This is the scenario Bitcoin is possibly within at the moment. With two inside bars established plus the fact that they have wicks below them present a tight consolidation. The fact that these bars have not even tested the low of the large bullish candle just before them (mother bar) is also a sign of strength.

This is usually where a lot of shorts will jump in anticipating a double top formation. The key thing to remember about potential weakness is that selling happens FAST, price usually does not linger at a resistance level. The fact that Bitcoin is consolidating at the high in this way points to a higher likelihood of a bullish break out. And it is reasonable for the next leg to test the low 9Ks.

Scenario 2: The Broader Retrace.

For whatever reason (usually a news catalyst), price can break lower. While this will excite the bears out there, suck in a lot of shorts and inspire tons of bearish articles calling for 4500, the 7K area is more realistic simply based on relative price structure proportions.

An extreme move would be considered a test of the 6300 area which is proportional to the .382 retrace of the entire bullish structure since the December low. A push back into the 5Ks will call for an adjustment of expectations on our part.

The mistake we DON’T make is think in terms of absolutes. Instead we LISTEN to the market and let it tell us what it wants to do by proving itself one way or the other. Then we ADJUST. This is why having opinions in any financial market is counterproductive. All the information you need is on your own chart. Don’t listen to people, listen to the price action. This is the short term philosophy that we operate by.

IF Bitcoin goes for the broader retrace, we will be looking for reversal patterns around the 7K area or mid 6Ks for a swing trade long. Again, an initial rally to at least the 9K area  is within reason from here.

Keep in mind, 9K and 10K are both psychological resistance levels on top of overlapping with some projected resistance levels. We cannot predict what will happen when price gets there, but it is reasonable to expect selling pressure to increase. The question you must ask is: are any reversal patterns appearing? The answer is what leads to making adjustments to orders and expectations.

More Short Interest, More Potential Buyers.

Overall, in strong markets, resistances often break followed by price momentum. The order flow that helps to push price through the major resistance (8500 area at the moment) usually comes from two sources: new buyers betting on the break out and all the shorts covering as a result of a forced liquidation, a stop loss order, or just manually exiting. Short interest has been a very helpful gauge during this rally, and it is climbing again while price is not going lower. This means selling is being absorbed and the more shorts that enter, the greater the potential buying pressure when price goes for the break out.

Can Bitcoin reach 10K on the next leg higher? NO ONE KNOWS, but structure favors the possibility. If a powerful bullish catalyst reaches the market (some kind of fundamental surprise), price can go vertical, but that is one scenario of an infinite amount. Another scenario is price slowly works its way there with some sharp moves higher sprinkled in.

Knowing the type of trade you are looking for and being prepared for what those setups look like is more effective than reacting to the opinions of others. If you are short term, you should have a very specific plan and know how to adjust it quickly as the market unfolds. If you are long term, then it is more about managing position size relative to the location of the price. Each method has its advantages and challenges, but if you do not know the difference, then start with investing (position trades). It is much easier and less demanding in terms of time and attention.

Questions and comments welcome.

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