Bitcoin in May: Skittish buyers in the face of the bear market

Bitcoin in May: Skittish buyers in the face of the bear market

Bitcoin bends, but does not break – Since the UST case, it seems that the cryptocurrency market is in a state of shock without managing to have enough buying power to restart the machine. Bitcoin attempted a halfhearted breakout on May 30. Buyers are defending the area from $28,000 to $30,000, but it would take a little more to revive the market. Moreover, the traditional market is rebounding and cryptocurrencies must take advantage of it. Can bitcoin go up again? Where is the king of cryptocurrencies? Let’s see the signals sent by the market.

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The monthly closing for the month of May

The monthly closing is not not positivebecause it marks a dynamic change :

Price of Bitcoin against the dollar (1M)

The closing was made below $33,000. The dynamic is now bearish in this unit of time. The closing is not catastrophic for all that, because the buyers managed to save the bracket at $29,000. If the support breaks, the market will most likely experience a very long bear market. The next support is at $19,000. For the moment, the support is holding and the buyers have not said their last word.

Momentum, which gauges the strength of buyers against the strength of sellers, is always bearish and below the bearish trendline in this unit of time. When this trend line (brown) gives way, the market could regain some color. It is a trendline that was set up in March 2021.

In the short term, bitcoin is stuck in a range

Bitcoin attempts to hold the low at $26,700 and buyers succeeded in reverse the dynamic short term :

Bitcoin is in a short-term bullish momentum.
Price of Bitcoin against the dollar (1D)

Bitcoin has managed to reverse on a daily basis. The course is again bullish in this unit of time until proven otherwise. Be careful all the same, the sellers remain strong because they have managed to bring the price back into the tidy between $28,700 and $30,700. If the buyers are able to push and close the price above $32,400 (i.e. the last high), bitcoin would officially break out of its range and could continue to climb towards $35,000. The bearish trendline (brown) will make resistance and we will have to remain vigilant as long as this trendline is above the price.

Binance’s Bitcoin Perpetual Contract

The basics on the indicators used here are explained in this article. It is a contract that has a strong volumeit is for this reason that we analyze it.

The daily perpetual contract

During the fall of Bitcoin, there were a lot of open positions.
Binance Bitcoin Perpetual Contract (1D)

The daily contract shows that while the price was falling (about 60% drop from the high), the players continued toopen positions. The number of positions has almost double since the beginning of the fall in late November 2021.

There are bound to be players who have tried to “buy the dip” with leverage, but there are also shorts. The funding has fallen well from the high and is currently neutral with passages in the negative. The difference with last summer is that the funding is less negative. We cannot conclude that the players are shorting aggressively.

There are two possibilities here :

  • There are mostly long : the market will have to find a point of capitulation. The market will have to silence all market buyers with leverage. For this, the market might fall below $25,000.
  • The market hoard the shorts : at each peak that has not been taken over by the price, there are potentially players in shorts who have positioned their stop loss. They are probably waiting for Bitcoin to go much lower. These actors are in the bear market scenario which will only recover in a few years.

If the buyers manage to hold the support current, it is possible that we will witness a squeeze shorts as was the case last summer. The macroeconomic situation is different and Bitcoin is highly correlated to the traditional market, so we must remain very vigilant.

The players seem to be shorting the Bitcoin market in the very short term.
Binance Bitcoin Perpetual Contract (2H)

It is interesting to note that there was many positions that opened during this range (+33% increase in open interest). A range marked with a neutral or even negative funding. It seems that the actors have shorted the market.

When Bitcoin broke out of the range on May 30, the shorts were in a awkward position, as they saw the market going in the wrong direction. However, the market made the gift of returning to the level or close to their entry price. This is not positive, because they can quietly exit positions without losses or continue to short the market. They could have accentuated the rise, but the market returned to the range. In such cases, it is not uncommon to return to the level of the lower limit of tidyhere has $28,700.

Market sentiment and analysis on chain

In this part, we will look at what is the behaviour market players. This information can give us clues for subsequent events.

Actors deposit Bitcoin on exchanges

Large amounts of Bitcoin are currently deposited on exchanges.
Bitcoin deposits (green) and withdrawals on exchange platforms (30D)

After experiencing a long period where Bitcoin was took of exchanges, it would seem that the actors are currently depositing a non-negligible amount in BTC on platforms for sale. The period remains mainly marked by withdrawalsbut this change in behavior should not persist.

The whales are no longer in the Bitcoin ship

The whales are actors who have more than 1,000 BTC in portfolio. It looks like they are no longer looking to accumulate Bitcoin at this time:

Whales do not continue to accumulate Bitcoin currently.
Number of addresses with more than 1,000 BTC in wallet. Source: Glassnode

These actors had taken advantage of the recent fall to accumulate bitcoin. Since March 2022, the trend has been towards falls as the price continues to fall. These players would have to continue to accumulate to show that current prices are attractive. This is no longer the case for the moment.

Market sentiment is at rock bottom

In the space of a few months, we went from a market sentiment where players were convinced that Bitcoin could reach $100,000has a very bearish sentiment with a majority of analysts who believe that Bitcoin may fall below $25,000.

Market sentiment is at rock bottom.
Measure of market sentiment. Source: Santiment

The Santiment website allows you to measure sentiment market thanks to its indicator weighted feeling. This studies the social media data to make a graph. Currently, we see that market sentiment is very low. It shows that the current level is lower than last summer.

Bitcoin fell by 60% since the November 2021 high. Despite the bearish momentum on the monthly and weekly, but the buyers are defending the support at $29,000. Buyers absolutely must continue to defend this support. The derivatives markets show that there are a lot of open positions currently on the Binance contract. It is possible that the market is piling up the shorts or that the buyers need to capitulate. the funding rate is not entirely clear on this and gives too little information to conclude. We are going through a period where the whales remain discreet in a context of general fear. Historically, these players have always been on the bull market bandwagon. We will have to wait for these players to show strong signs of accumulation.

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