Bitcoin went back and forth a bit on Wednesday, oscillating between the $23K and $24K levels before settling the day slightly in the red to form a smaller bearish Doji candle on the daily chart. This is slightly bearish but nothing we haven't seen before after enormous rallies as we've just experienced. Bitcoin is up almost 250% since October; pullbacks are healthy and frankly necessary if Bitcoin's to have a sustainable bull market going forward. That being said, I think Bitcoin's got some downside weakness from here in the short-term.
(December 22, 2020 7:30PM EST)
I think Bitcoin's due for a short-term pullback - probably not far, possibly down to the $20K level or maybe just underneath if we're lucky enough for that buying opportunity. The 23.6% Fibonacci retracement level around $20,879 makes sense, then the 38.2% around $18,762 and finally the 50% fib around $17K is ultimately my bottom here. I'm not hopeful Bitcoin retraces that low but anything is possible; if it does, I will be waiting with dry powder to deploy.
For now, I think BTC probably finds resistance around $25K or maybe $30K if it really gets going in the short-term. We are a bit overextended but there's simply too much demand and supply constraints to justify a major price correction less a black swan. If/when Bitcoin does pull back, I'll be looking for a pullback to $20K or possibly a bit lower which would not likely last long.
In traditional markets, equities are still fluttering around ATHs but have experienced a bit of volatility in the past few trading days, possibly indicating a topping pattern. Gold recently rallied back above the $1,900 level before pulling back a bit, selling off nearly $60 in the last 24 hours. Meanwhile, the US Dollar recently put in a 2.5 year low, which further validated its negative covariance to Bitcoin, which has recently surged and broken through its previous ATH to rally another 20% thereafter. Bitcoin fund issuer Grayscale announced they have to pause 6 of their most popular crypto-backed funds popular among traditional investors, Bitcoin first and foremost, due too demand exceeding Grayscale's ability to buy and custody enough actual Bitcoin. Inference: Bitcoin demand is high and growing higher, and supply is low and getting lower. Dips are buying opportunities; accumulate is the name of the game.
Support: Look for support at the $20K level which is resistance turned support and a large, round psychological number. I think there is and will be FOMO to buy BTC under $20K (can you believe we're saying this already?), so I think a dip to $17K - $18K will quickly be bought up, which lines up with the 61.8% or 78.6% Fibonacci retracement levels.
Resistance: We're in uncharted waters here, but I think now that BTC is well into the five figures, it'll move in either $2,000 or $5,000 increments. Accordingly, my target is $25,000 which is a nice large, round psychological number, or possibly $30,000. From there, we'll look for exhaustive candles indicating Bitcoin is running out of steam and then look for support levels to target for dips to buy. Bitcoin's going higher - no sense in trying to fight this trend.
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