Chart by TradingView
Bitcoin’s recent 2-week consolidation breakout above $50.5k has likely concluded Phase D of Wyckoff Accumulation, preparing the cryptocurrency to enter the Phase E mark up.
Wyckoff Accumulation is a technical and volume-based accumulation pattern with multiple phases that exhaust supply and enables larger players to build large positions as price consolidates. Extended periods of consolidation and falling aggregate volume eventually signal supply exhaustion, and the price will be ready for a mark-up.
Bitcoin has closely followed each Phase in Wyckoff Accumulation since May 2021, broke out of the $30k to $40k consolidation, and has recently reclaimed $50k, ideally setting BTC up for a Phase E breakout higher.
The technicals and on-chain metrics have continued to validate strong accumulation, especially with large long-term holders in BTC. Throughout May, June, and parts of July, on-chain data clearly showed many buyers who FOMO’d into the market above $50k capitulated in the $30k to $40k range.
Meanwhile, wallets with coins that are 12-months and older continued to accumulate as BTC spent a long time between $30k to $40k. The amount of consolidation ended up making $31k to $40k hold one of the highest clusters of BTC according to the UTXO Realized Price Distribution metric. When the price is above these levels, it can be seen as strong support.
The most significant daily close for BTC occurred on July 20th, 2021, during Phase C, when BTC made a daily close below $30k. Bears were quick to celebrate and continued their calls for Bitcoin to fall towards $20k and $10k and that the bull market was over.
Although the price closed below $30k, on-chain data was showing absolutely no major signs of large entities selling. Aggregate volume was down 88% from the selling climax. Long-term wallets with large amounts of illiquid supply and large miners were holding to their stacks. If these cohorts were selling on that day, we would have seen aggregate volume spike to tens of billions of dollars worth of BTC, likely causing it to fall significantly lower.
Bitcoin then printed a bullish engulfing candle and started a major trend reversal, leading to a breakout above $40k and now $50k. This move marked the completion of Phase C, where large operators shook out weak hands with a large move below the trading range and back up, followed by multiple tests, usually making higher lows with less volume.
With on-chain metrics showing record amounts of supply being held by long-term holders, miners continuing to hold, with supply deeply exhausted, the conditions strongly favor the bulls as Phase D has likely been completed after a 2-week consolidation and breakout.
Phase E is the last phase in Wyckoff Accumulation, where price rallies significantly. It’s important to emphasize that price does not push higher without corrections in Phase E. We can expect shakeouts and long liquidations along the way, which can be seen as opportunities to add to positions. It is important to see higher lows being made with less volume, indicating slight profit-taking and selling from weak hands.
Larger players will likely use these pullbacks or consolidation phases to add to their positions as demand is firmly back in control of the market.
The recent breakout above $50k is a very bullish signal for BTC and marks another step forward in bull market continuation validation. This week will be BTC’s time to establish $50k as support as all backtests of this level must hold on a weekly closing basis.
Today, El Salvador is officially adopting Bitcoin as legal tender, a truly historic day for the largest cryptocurrency. BTC managed to rally up to an intraday high of $52.9k but reversed as it found some selling pressure and longs were liquidated, potentially raising questions of a “sell the news” event. So far, BTC found support at $50.5k, a previous resistance level, and wicked back up.
Regardless, Wyckoff Accumulation and bullish on-chain metrics strongly suggest the dips will likely be bought up, and conditions overall remain bullish for Bitcoin. Anything can happen in the near term, but the strong fundamentals, technicals, on-chain metrics, and momentum suggests the mid to long-term outlook remains bullish.