Just like that, Bitcoin reclaimed its September highs!

In a report a few weeks ago, we outlined:

Derivative speculators are bearish, while long-term spot investors are continuing their accumulation. These are fertile grounds for a powerful disbelief rally that can trap bears.

We've seen this play out over the last few weeks, and yesterday's action only confirmed our suspicions, where there was a notable short squeeze that drove a $3,000 move in the space of a few minutes.

Before you put on your first trade or buy any asset, there's one question every investor needs to ask themselves:

What's my objective?

For most investors, the answer is pretty simple. It comes down to maximizing returns and minimizing losses in a way that fits within each individual's unique preferences.

Despite this, you'd be surprised with the number of people who use the market as an outlet to express their political views rather than as a way to make money.

We're raising this today as a reminder to stay objective and always follow the money flow, rather than the opinion of journalists or analysts.

One field that crypto investors are particularly susceptible to these biases is within the decentralized finance sector.

DeFi is the darling of the crypto world.

This is the video recording of our October 1, 2021, All Star Charts Crypto Weekly Strategy Session.

We've talked at length about the accumulation taking place on the part of larger trader cohorts.

To visualize these developments, we've primarily used all the on-chain metrics at our disposal. Another way to go about doing this is by going directly to the order book.

Using heatmaps of all the limit orders on crypto exchanges, we can get an idea of where traders are accumulating and where they're selling into strength. The more yellow the heatmap, the bigger the size of the orders.

This could be the single most important chart in the world right now.

We cannot overstate this development.

We finally got a major resolution in the US 10-year yield, which has reclaimed that critical 1.40% level this week. This begs the question as to what a rising rate environment might mean for investor portfolios. The important implication for stock investors is the renewed tailwind for cyclicals. When rates are rising, sectors like financials, industrials, materials, and energy are all typically outperforming, which is exactly what we’ve started to see in the last week.

And of all these groups, the most direct beneficiary is the regional banks, which are back above their 2018 highs. An overwhelming proportion of their bottom line is tied to lending, so higher yields and widening spreads are a significant tailwind.

This is the video recording of our September 24, 2021, All Star Charts Crypto Weekly Strategy Session.

Have you ever held a beach ball underwater and pressed down?

You can feel the pressure on your arms - the beachball is trying everything to float back up.

So what happens when you let go? It jumps into the air!

Once that pressure holding it down eases, it has nowhere to go but up.

The market is the exact same.

When everything's selling indiscriminately, we want to look for the sectors, stocks, or in this case, cryptocurrencies that are bucking the trend and pushing up against your arms.

So what's going to happen when that selling, that force holding the beach ball gives up?

It's gonna shoot higher!

That stock or cryptocurrency closing the day higher in the face of broad distribution is likely to be the next leader when that force holding everything down subsides.

We saw this take place with Solana in August, and we know how that turned out...

Now that the market finds itself beaten and bruised over the last few weeks, we need to ask the same question - where's the relative strength?

That's the smell of risk-off...

47,000 was the level, and Bitcoin did not hold it.

Here's what we laid out last week:

For those with a shorter timeframe, the bias is higher above 47,500 toward the former crash highs of 53,000:

Otherwise, if this breakout fails to hold, expect more messy action in the coming days.

And fail it did...

As the old saying suggests, from failed moves come fast moves in the opposite direction:

This 46,000-47,000 level wasn't just an important inflection point in the near-term, but it also coincided with Bitcoin's last level of defense before crashing in May.

If we're below this zone of overhead supply, the bias is sideways to lower.

This is the video recording of our September 17, 2021, All Star Charts Crypto Weekly Strategy Session.

In Monday's post, we mentioned that this would be very much a "wait and see" week as we watched Bitcoin's near-term consolidation play out.

And here's what we outlined in yesterday's note:

We’re not really expecting much more than tumbleweeds and a few winners here and there while Bitcoin’s stuck below the upper-end of this range near 47,500.

But if we see a breakout above that level, we’ll be deploying some more cash into new long positions.

It looks like we could be getting a resolution this morning, with Bitcoin trading back into the 47,000's.

For those with a shorter timeframe, the bias is higher above 47,500 toward the former crash highs of 53,000:

In yesterday's note, we outlined that this looks very much like a "wait and see" week, with Bitcoin still in this messy sideways range.

44,000 is a big level of interest that the market respected, with prices trading back above our long-term macro risk level of 46,000 this morning.

But we're not really expecting much more than tumbleweeds and a few winners here and there while Bitcoin's stuck below the upper-end of this range near 47,500.

But if we see a breakout above that level, we'll be deploying some more cash into new long positions.

We're seeing this play out with the number of new monthly highs dwindling recently:

In traditional markets, we've been making the case that they've been a big fat mess.

So with all things considered, the alpha taking place within crypto has been catching our attention. But even this asset class has succumbed to the choppy action experienced elsewhere.

The bottom line is that if Bitcoin's below 46,000, the probability of success in new long positions reduces.

Looking more tactically, 44,000 is another critical inflection point. Not only does this conjuncture represent the 38.2% retracement from the recent thrust higher, but also the AVWAPs from all-time highs and July lows, as well as the 50-day moving average.

If we hold above 44k, things are likely not completely falling apart, and though the near-term trend is still choppy, there will still continue to be winners under the surface.