Recent Price Action
Bitcoin – BTC has been struggling for seven consecutive weeks. The short-term chart pattern turned bearish when Bitcoin penetrated 50,461 on 6 December (Chart #1). However, the bulls were able to recapture the short-term momentum when BTC generated a weekly close above 50,461 on 24 December. Unfortunately, there has been no follow-through buying. Based on the price action from 27 December, it appears that Bitcoin is once again rolling over to the downside (Chart #2). Most likely, the bullish breakout on 24 December was a false breakout.
The critical support level on the daily chart is 39,716 (Chart #3). This number will determine the success or failure of BTC in 2022. If Bitcoin has any chance of recording a new all-time high in 2022, it must stay above 39,716 on a weekly closing basis. Will BTC drop below this critical support level? Despite the bearish price action during the past two months, it’s unlikely that BTC will generate a weekly close below 39,716.
Chart #4 displays the Money Flow Index (MFI) for the past nine months. MFI is one of the best indicators for determining the amount of money flowing into a speculative asset. It combines time, price, and volume into an oscillator format, thus allowing a trader to visually compare areas of divergence. As you can see from the chart, MFI has created three levels of bullish divergence during the past nine months. A divergence occurs when a new low in the oscillator is not confirmed by a new low In Bitcoin. This is a very bullish event and it has occurred on three separate occasions since 22 June.
Based on the Money Flow Index, speculators are purchasing large amounts of BTC each time the price experiences a sharp decline. This is an indication that Bitcoin will not drop below the critical support level @ 39,716.
Ethereum – The short-term Ethereum chart pattern is slightly bearish. If ETH produces a daily close above 4,233, the chart pattern will rotate from bearish to bullish (Chart #5). ETH is in much better technical shape than BTC. Ethereum has outperformed Bitcoin since mid-November. Most likely, this trend will continue as we move into 2022.
Let’s examine the Aroon Oscillator. ETH recorded a bullish divergence on 6 December. The oscillator generated a new low. However, it was not confirmed by a new low in price (Chart #6). This is a very bullish occurrence and it suggests that Ethereum will not drop below 3,605.
Solana – One of the biggest movers in 2021 has been Solana (SOL). During the past 12 months, SOL has gained 11,425%. SOL has experienced a sharp correction during the past six weeks, along with the entire crypto universe. After recording a new all-time high on 8 November @ 258.91, SOL has declined 32.7% (Chart #7). Despite the recent decline, the short-term chart pattern continues to remain bullish. As long as Solana stays above 146.99 on a weekly closing basis, the momentum is in favor of the bulls (Chart #8).
What is the price target for 2022? The average price forecast within the crypto community is $500 to $700. A few analysts have projected a target of $1,000. The Fibonacci target is $674.51. The formula is: 258.91 – 2.05 = 256.86 x 1.618 = 415.60 + 258.91 = 674.51
Will Bitcoin Exceed $100K in 2022?
During the past 12 months, many of the top crypto traders were predicting that BTC would exceed $100K by the end of 2021. These forecasts turned out to be wrong. What about 2022? Will Bitcoin exceed $100K in 2022? Let’s discuss the details.
In response to the global pandemic in 2020, G20 central banks created unprecedented levels of liquidity. A tremendous amount of this liquidity found its way to cryptocurrencies. This explains the dramatic crypto rally beginning in March 2020. For example, the price of Bitcoin fell to 3,925 during the early stages of the pandemic in March 2020. This was followed by a substantial rally over the course of the next 18 months, as central banks expanded their balance sheets to record levels. Bitcoin reached a high of 68,906 on 8 November 2021, generating a gain of 1,656%.
During the past few months, several G20 central banks have begun the process of removing excess liquidity from their respective balance sheets. Most likely, this reduction in liquidity will continue throughout 2022. Consequently, this will eliminate a great deal of speculation from stocks, commodities, and crypto. Therefore, the likelihood of Bitcoin reaching $100K in 2022 is rather small. The most likely scenario for 2022 is a trading range. Based on Fibonacci, the trading range will be 28,957 to 68,906 (Chart #9).