This is a daily chart of Bitcoin from November 2021 to March 2022. This case study focuses on how prices can move through important supply and demand areas using both the anchored VWAP as well as the anchored volume by price tool on TrendSpider. Some of the important terms to take away from this case study are “volume gaps” and “breakeven supply” zones.
BTC Daily Chart Case Study: Using Anchored VWAP with offset and Volume By Price showing breakeven supply zones
- This number shows the anchor point for both the volume by price and the anchored VWAP tool. An “anchor point” is a point on the chart where someone starts measuring a particular indicator. In this case, the VWAP is essentially measuring the dollar cost average since the November high in 2021. The volume by price is anchored at the same point which is essentially measuring where volume has occurred since the November 2021 reversal point.
- This number shows the anchored VWAP with different percentage offsets in which price has respected a certain percentage. The orange line is the original anchored VWAP from November 2021. The blue line is a -1.5% offset from the original VWAP based on how price was rejected at this band back in early December 2021. The red line is a -2.5% offset from the original November reversal point which also was a point in which price reversed over the 5-month period from November 2021 to March 2022.
- This number shows the “volume gap” which is an area shown using the anchored volume-by-price. This “gap” is essentially a gap in liquidity where not much volume has occurred. This “volume gap” acts similar to price gaps in which prices can move very quickly through this “vacuum” in the market as you can see what happened in late March 2022.
- This number shows an area right above the volume gap which is the next level in which there has been a lot of volume occurring since the November 2021 reversal. This “breakeven supply” area is essentially volume that has been holding in a drawdown that is now back to breakeven. Once these market participants are back to breakeven, some will sell to lower their exposure after dealing with a big unrealized drawdown. These areas generally act as resistance zones which can sometimes last a few days before price moves higher or can be longer-term reversal points.