Recent Price Action
Bitcoin — BTC has been drifting lower for six consecutive weeks. The bearish price action began on 10 November when the bulls were unable to create a sustainable rally following the all-time high @ 68,906 (Chart #1). Officially, the bulls lost momentum on 6 December when Bitcoin dropped below 50,685 (Chart #2). In order to reverse the bearish chart pattern, the bulls must produce a weekly close above 50,685. It does appear that a triple bottom may have occurred @ 45,544 (Chart #3). However, the most likely scenario is a continuation of lower prices.
Based on the daily chart, BTC is extremely oversold. The Aroon Oscillator is one of the most accurate indicators in terms of measuring extreme price levels. The Aroon Oscillator fluctuates between -100 and +100. Any reading below -80 indicates an extremely oversold market. As you can see from Chart #4, the oscillator recorded a reading of -96 on 17 December. This is the lowest oscillator reading in over two years, which is a clear indication that Bitcoin is dramatically oversold.
Ethereum — The short-term Ethereum chart pattern is slightly bearish. If ETH produces a daily close above 4233, the chart pattern will rotate from bearish to bullish (Chart #5). ETH is in much better technical shape than BTC. As you can see from Chart #6, ETH has outperformed BTC since mid-November. Most likely, this trend will continue as we move into 2022.
Let’s examine the Aroon Oscillator. In comparison to Bitcoin, Ethereum is much stronger than Bitcoin. As we discussed during our BTC analysis, the oscillator recorded a reading of -96 on 17 December. In terms of ETH, the oscillator produced a reading of -12 for the same date (Chart #7). This is a clear indication that the bears were unable to push Ethereum into extremely oversold territory. Too many speculators were willing to buy ETH well before the oscillator recorded an oversold reading. This is a very bullish sign for Ethereum.
Terra (LUNA) — Several new tokens arrived on the scene in 2021. Terra is an example of a token that has exploded during the past 12 months. Although Terra was launched in April 2019, it did not attract any investor attention until 2021. Terra’s native token is LUNA, which was traded for less than $1.00 in January. During the past 12 months, the token has exploded to the upside with a gain of 13,959% (Chart #8). What is Terra and why is it so popular? Let’s discuss the details.
Terra is a blockchain protocol for issuing fiat-pegged stablecoins and creating decentralized financial infrastructure. With Terra, you can earn interest on stablecoins, spend crypto with merchants and replace most of your banking needs with one seamless DeFi protocol. The ultimate goal of Terra is to disrupt the legacy banking system, credit card networks, and payment systems like PayPal.
LUNA is the platform token that collateralizes and stabilizes the price of Terra stablecoins. LUNA can be purchased on several crypto exchanges.
LUNA recently recorded a new all-time high on 22 December @ 97.52. What can we expect in 2022? Although it’s almost impossible to accurately forecast the future price direction of any speculative asset, we can form an educated guess by calculating the Fibonacci ratio. Based on the price action during the past 90 days, the forecasted high for LUNA in 2022 is 137.92. Please review Chart #9.
Fibonacci Is A Great Trading System For Bitcoin
Arguably, the most reliable technical indicator in modern history was created by a twelfth-century Italian mathematician by the name of Leonardo Fibonacci. The vast majority of mathematical historians consider Fibonacci to be the greatest mathematician of the Middle Ages. In fact, many experts in the field of mathematics claim that Fibonacci was one of the ten greatest mathematicians of all time.
Without question, Fibonacci’s greatest contribution to the field of mathematics was his creation of the Hindu-Arabic numeral system. Fibonacci used this numeral system to dramatically simplify commercial bookkeeping, converting weights and measures, calculating interest payments, and the exchange of money between merchants. Although his creation of the Hindu-Arabic numeral system was his crowning achievement within the field of mathematics, Fibonacci will always be most famously known for the Fibonacci numbers.
What are Fibonacci numbers? They are a sequence of numbers developed by Fibonacci in circa 1202. Fibonacci numbers are used in the study of nature, music, agriculture, computer applications, price forecasting, and several other fields of study. Stock, commodity, and crypto traders use “Fib” numbers to calculate support and resistance levels.
It’s not uncommon for stocks, commodities, and crypto to fluctuate between Fibonacci support and resistance levels for long periods of time. When a major breakout finally occurs, it usually marks the beginning of a substantial move. As an example, please review the recent price action in Bitcoin. Chart #10 contains six months of trading activity. The 6-month trading range is 29,348 to 68,906.
Very often, Fibonacci levels will act as a magnet, as prices fluctuate between support and resistance. Please notice on the chart how Bitcoin has been consolidating between 38.2% and 61.8%. The important numbers to watch are 44,459 (61.8%) and 53,794 (38.2%).
As you can see from the table, BTC has penetrated three of the support levels during the past six weeks. Bitcoin is currently in the middle of a mini-bear market. The most likely scenario is a continuation of the mini-bear market. Therefore, we should expect Bitcoin to penetrate the 61.8% Fibonacci level @ 44,459. A weekly close below 44,459 opens the door to the final Fib level @ 37,813.
In order to reverse the bearish momentum, BTC must penetrate the 23.6% Fibonacci level @ 59,570. At least for now, the bears are in control of this cryptocurrency.
The Fibonacci ratio continues to remain one of the most reliable indicators for crypto traders. During the past few years, the Fibonacci levels have produced excellent results. Fibonacci has definitely stood the test of time.