• One Percent Trading Group

Bitcoin - Consolidation or Absorption?

Updated: Aug 30

After the recent fall, the market has found value at the present price point and it seems to be stuck in a consolidation area. The question most would like to know is, will bitcoin go up or down from here when it breaks through this local resistance or local support?

Bitcoin Daily Chart

As we know, price lags behind the fundamentals. An example is how News Releases trigger market activities or the scenarios of how Elon's words/actions affect the public engagement and interests with the crypto markets.

Therefore, good knowledge and applications of fundamental data can help one make better trading decisions.

But with the case of BTC where there's few fundamental resources or transparency available within the crypto space, we lean towards the use of the COT data which is available and can be adopted as a supporting tool with our primary technical analysis. Although note that in this case, we'll derive our bias from a technical standpoint and then use the COT for confluence to get into the trade.

Bitcoin COT Chart - One Percent Trading Group

With a noticeable strong correlation against the price chart, COT data shows quite some information that can be leveraged to better confirm trade ideas.

To interpret the above chart better we can read further about the Commitment of Traders report from https://www.news.onepercenttradinggroup.com/post/commitment-of-traders-report.

We want to trade in line with the direction of the Non-Commercials, as they trade trends and have influence in price movement, it will be good to have a bias in line with their overall interest/bias too.

Just to note with the COT Report, the retail is more of an investor when it comes to the subject of BTC.

While the speculators (Hot Money) mostly go with the order flow either in a rally or in a downtrend, and for now they are booked shortly therefore we lean towards the selling side but watch keenly for confluence and confirmation from price action going forward as we anticipate a breakthrough the present range.

Bitcoin Daily Chart - Value area

At the moment, any breakout would suggest that price will find value at those pockets of liquidity at the high or low.

Bitcoin 4Hour Chart Showing Wyckoff Re-distribution and Accumulation Schematics

The volume activity seen within the range defines that there's absorption taking place.

An auctioning between Bid and Ask (demand and supply) to determine what side will drive prices.

In conclusion, we wait to get more reaction in price breakout while leaning towards the COT data for confluence.

Price and volume response at the breakout would give signs of the shift in tide with the next target to be at the liquidity pockets above or below the current price.

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