BTC’s weekly close above the 21-week and 200-day moving averages flashed the largest technical buy signal since April 2020, marking a major step forward for potential bull market continuation. Although this is a very bullish signal for BTC, it is important to see follow-through higher in the weeks ahead to validate it.
There has been a bearish divergence forming on the 4-hour and daily BTC chart for over a week, signaling near-term caution on the technicals. Additionally, the TD sequential on the daily chart printed the 9th consecutive candle to the upside, suggesting the risk of a local top is increasing.
US stocks recently made new all-time highs, but recent selling pressure managed to drag down BTC as the market went risk-off. As we reported, the weekly close above the 21-week and 200-day moving average was very bullish, but BTC remains in a tight spot as it now has to prove it can sustain above the 200-day moving average and continue pushing higher. Risk-off in US stocks isn’t helping for now.
3-Day Chart Showing Strength
While short-term technicals are signaling caution and a cool-off in momentum, the 3-day and weekly charts continue to trend higher, showing signs of strength.
BTC completed the 3-day close, managing to flash another bullish pulse higher. What’s very interesting is a recent pattern that’s forming on the same chart – since the false breakdown below $30k on July 20th, 2021. BTC has been moving higher for 3 consecutive candles, then falling 2 candles, with another 3 consecutive candles moving up.
BTC is currently on the second candle to the downside and has been testing the 50-day moving average on the 3-day chart at $44.1k
Another longer-term sign of strength in momentum is the weekly moving average convergence turning bullish. Although still early and dependent on where BTC closes for the week, this can be seen as a sign of a trend reversal on the higher time frame charts.
On-Chain Data Remains Bullish
With BTC correcting over the last few days, the on-chain data has not been showing major signs of long-term holders and entities holding illiquid supply selling.
Spot exchange reserves have been flat with no signs of large inflows, a sign of incoming selling pressure. Spot exchange net flows have been neutral to negative for the past 4 days despite price falling, which suggests the dip is being bought. BTC miner reserves continue to show strong accumulation, topping 1.85 million BTC – just under 10% of the total BTC supply. BTC miner flows to exchanges have remained flat to slightly declining, which verifies the increase in miner reserves.
With strengthening fundamentals, and on-chain data continuing to show long term holders are not selling the rally or pullback, this will likely come down to technical price confirmation relative to the 21-week and 200-day moving average, and external factors such as stock market volatility, the dollar, and monetary policy from central banks.
Ideally, BTC bulls would like to see a push higher heading into the weekly close to print the second close above the 21-week and 200-day moving average, further validating the largest technical buy signal since April 2020. So far, the fundamental, on-chain data and mid-term technicals favor the bulls.
If BTC closes back below the 21-week moving average at $43.4K and the 21-week exponential moving average at $40.9k, this could invalidate the technical buy signal, showing increasing downside risk, and give the bears the advantage. For the next few weeks, we will have to see how the bulls and bears fight it out for BTC to find direction.
