Wen moon? Probably not soon: Why Bitcoin traders should make friends with the trend

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The impact of Federal Reserve policy and bitcoin’s higher time frame market structure suggests that the BTC price is not yet ready for a trend reversal.

Bitcoin (BTC) price continues to decline below the $22,000 level and widespread narratives among traders and mainstream media suggest that a risk-off sentiment is a key perspective ahead of this week’s Jackson Hole summit.

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In the three-day symposium, the Federal Reserve is expected to clarify its outlook on inflation, interest rate hikes and the overall health of the United States economy.

Meanwhile, traders on Crypto Twitter continue to fantasize about a “Fed pivot” where interest growth will drop below 0.25 basis points and some sort of monetary easing re-emerges, but the Fed’s adoption of a dovish point The outlook for the short-term looks unrealistic, given the central bank’s 2% inflation target.

About bitcoin’s most recent price action. There is an old saying among traders:

“Fade the short-term trend in favor of the long-term trend.”

From a bird’s eye view, BTC price is in a clear downtrend showing continuation with a four-month long stretch of recurring bear flags.

Sure, on-chain data indicates that the price may be on the bottom.

Of course, looking at the whale and shrimp BTC addresses can point to the total volume and some on-chain data accumulation.

Yes, open interest on BTC and Ether continues to reach record highs and this rapid ETH merge and ETH proof-of-work hard fork adds fuel to the token narrative leading to a juicy short squeeze on BTC and ETH.

Any of those things can happen, but beware the narrator of those hope-filled dreams and remember that trend is always the best friend a trader can lean on.

As unpleasant as it may sound, the trend is down. Bitcoin continues to meet resistance at its long-term descending trendline and the price has failed to secure resistance at major moving averages such as the 20, 50 and 200-day moving averages.

BTC/USDT daily chart. Source: Tradingview

Each price drop is creating only one flag-pole, and the ensuing “consolidation” forms the flag of the bear flag continuation pattern. As the pink box on the daily chart shows, BTC price trades only within a defined range before the volume profile breaks into the visible range and implied liquidity shown by the liquidity maps.

Essentially, “nothing to watch here” unless the price turns some daily candles showing higher highs, i.e., BTC clearing $25,000 and moving into the $25,000 to $29,000 zone. That volume profile gap needs to be closed.

From there, one would either want to see consolidation within that new higher range, or a trend reversal continuation where the 20-MA and 50-MA act as support. As mentioned earlier, there are certainly many other data points that make a strong case for why the current price range is a buy zone, but what may be true for one trader is not necessarily true for everyone.

Some investors may open swing long here and short and exit it as they are flush and it is part of their plan. Others have a small purse and cannot afford the lost opportunity cost of being locked in a red position for months on end. Traders are always encouraged to do their own research, build their thesis, and manage risk in a way that best suits their position.

Jackson Hole is coming up and the Fed needs to keep raising rates until inflation and other metrics are under control. Equity markets are strongly correlated with bitcoin price, so it remains to be seen whether the SPX and DJI continue to rally, or whether future actions by the Federal Reserve will begin to damage the recent bullish momentum.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.