Bitcoin rallied on Wednesday after being rejected yesterday by near-term resistance at $12,000. Bitcoin is forming higher highs, but will probably consolidate to lower prices before making its next move higher.
(Aug 12, 2020 2:30 PM EST)
Bitcoin markets have recovered a bit during the trading session on Wednesday, reaching back up towards the $12,000 level above which is both technical resistance and a round number and psychological barrier. Interestingly, Bitcoin has been trading in lockstep with gold, which has also pulled back, as BTC is essentially a commodity, and also functions and is perceived as a digital alternative to gold as a ‘precious’ metal and store of value.
There is major support underneath near the $10,000 level as the 50 Day Exponential Moving Average (EMA) offers support just above around $10,082, the 23.6% fibonacci retracement level around $10,088, and ultimately $10,000 being a large, round number has been and continues to be a significant psychological level, earlier this year as resistance, and now as support. The 200 Day EMA and 38.2% retracement level offers additional support at the ~$8,900 level and represents the “line in the sand.” If BTC breaks below this level, look out below, the bears may not be done yet.
Now that BTC has impulsively broken above and maintained the $10,000 level, the macro trend is likely higher over a medium-longer time-frame. Ultimately, this is a market that is grinding its way up towards the 2017 all-time highs again, but BTC needs to scare off the remaining “weak hands” in the market. There are not many traders from 2017 left who haven’t already sold at a loss or broke even and gotten out from foolishly buying during the December-January mania. Remember, BTC has only ever traded higher than $12,000 for a brief eight day period in December 2017, so consider how few traders and how little money has been idly “trapped” at higher levels waiting to sell at break even. As such, there shouldn’t be much resistance between the $12,000 and the previous all-time high at $20,000, so once Bitcoin breaks through $14,000 it could run up quickly to $20,000 before taking a breather ahead of its next rleg higher.
Of course, it goes without saying, especially in crypto, that we could see some type of major sell off, as Bitcoin and its smaller-cap underlings tend to programmatically follow traditional equity markets during significant liquidity events, as seen in the massive March sell-off. With bonds futures bouncing off lows yesterday and today equities forming what may be a double-top from Q1 2020, equities may be signaling more downside pain in the very near future. In the short-term, look for weakness as BTC digests its recent run up to $12,000 and pulls back as it prepares for its next leg up. That being said, based on what the fundamentals and technicals are showing, we have no interest in shorting BTC. In the medium-long term, we’ll be looking to buy dips and accumulate for the next bull cycle, which, as we’ll discuss in coming articles, may have already started.
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Disclaimer: This is not financial advice and should not be considered as such.
