Outlook: Bitcoin rallied slightly on Wednesday, initially pulling back before turning around to form a hammer and rallying to just above the $19,000 level, eeking out a barely positive day. In this context, coming after an impulsive, parabolic rally and two recent rejections near the ATH, this looks like a topping pattern with increased volatility as buyers struggling to hang on. Given the enormous bullish engulfing candle the other day which lead to a marginal new ATH, it's possible that this weak looking hammer candle could lead to higher prices, however, that is not my primary inclination. I think a pullback is in order to digest the gains, as relative strength is declining, there is a lot of sideways chop in the markets, and typically assets will pause at an ATH and retrace at least once before making a successful breach through to new highs. Bitcoin is no exception, and I think a 30% pullback makes sense here to the low mid-low five digits.
In latest media news, Visa announced they will be partnering with BlockFi to offer a credit card that rewards users with "cash back" in the form of Bitcoin. This is yet another boon to Bitcoin's burgeoning mainstream acceptance, as we have beaten to death the prominent investors and payments companies who have made sizable allocations in H2 2020. Going forward, I am a buyer on dips, which I think probably bottoms in Q1 2021 between $12,000 - $15,000, depending on the severity of an equities market fall -- if one happens. A second round of COVID stimulus is virtually guaranteed in Q1 2021 at this point, which served as a massive boost to markets over a 6+ month span. I expect Bitcoin to benefit from additional QE, perhaps even greater than other traditional asset classes.
Interestingly, gold has recently plummeted to yearly lows, dropping below the $1,800/oz level and reaching as low as $1,750 before bouncing, currently trading just above $1,800. This is a divergence from just a couple months ago when Bitcoin and Gold were moving seemingly in lockstep and opposite the USD. This is worth keeping an eye on as gold's recent weakness could potentially signal a coming drop in Bitcoin as well. We'll cover this more closely soon.
Support: $16,000, or the 38.2% Fibonacci retracement acted supportive over the weekend as Bitcoin sharply pulled back, so I think that's a safe level to target for a potential local bottom. If Bitcoin goes lower, I think it ultimately finds too much buying pressure around the 50% or 61.8% fib levels, $14,852 and $13,670 respectively.
Resistance: $20,000 remains firm resistance, which makes sense as it's the previous ATH. When BTC breaks above $20,000, which, may actually happen in shorter time than we had anticipated, I suspect a non-insignificant amount of stop-limit buy orders that are set just above $20,000 will be triggered, causing a rocket in price up to $25,000 or even $30,000 in short order.
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