Bitcoin fell last week, dropping about $1,000 before bouncing off the $10,000 level and settling slightly lower on the week at about $10,750. This looks like buyers stepping in to catch a knife, as this is not a very bullish looking price setup, indicating the selling doesn't appear to be over quite yet.
(September 27, 2020 8:00 PM EST)
Support: Bitcoin is currently trading above the 50 and 200 Week EMA's, which should act as significant long-term support below at ~$9,324 and $6,792, respectively. If Bitcoin were to fall off a cliff and drop below the $10,000 level, look for deeper wallets to step in to buy around the 50 Week EMA and then finally the 200 Week EMA. If Bitcoin falls below that, the uptrend is in jeopardy.
Resistance: Looking ahead, Bitcoin is a buy on the dips scenario, with medium- and longer-term investors looking to add on pullbacks, particularly the $10,000 and ultimately $9,000 levels below, which should be strong support. Next immediate resistance overhead is the July 2019 highs around $14,000. The good news is that $14,000 is probably the last stop before Bitcoin runs up to new all-time highs around $20,000, as there should not be many sellers between $14,000 and the previous all-time highs around $20,000 US. Longer-term, the sky is the limit for BTC, especially if the Lightning Network Upgrade is implemented in the next 12 months to accommodate new money entering the market and mitigating high transaction fees. One positive note is that once Bitcoins breaks $12,000 and then $20,000, it should be a quick run up to $30,000 or $40,000, as there will be little selling resistance. In fact, there might be a surprising amount of buy orders set around the $50,000 level as it is only around that price valuation and market cap that institutions will view Bitcoin as an asset class with sufficient liquidity to dabble with.
Outlook: We are in that time of year where liquidity has been low, hence the market weakness of late in equities, commodities, and even Bitcoin. Also, if seasonality is of any indication of what's to come in the near future, late Sept and October tend to be volatile and red months, pointing to a trough in markets over the next few weeks leading up the US election. There is a lot of fear, uncertainty, and doubt in the air right now with COVID upticks starting to happen in the UK and colleges all over, civil unrest in the US, a looming US election with major implications, and the central banks around the world printing trillions of dollars into the currency supply. I see more weakness in all markets, Bitcoin included, over the next couple few weeks, with a bottom striking as early as the first week of October. That being said, the selling is probably not over yet, and the price action leads me to believe that any rallies over the next few days are stop-hunts for shorts, at which point the selling will resume and a lower low with regards to current short-term trends are concerned. On the bright side, I will be looking for a medium-term bottom and value price level to DCA into more BTC and ETH before an expected late market recovery to end the year into 2021. For now, Monday (tomorrow) is a US holiday (Yom Kippur), so look for low trading volume until Asia trading opens on Tuesday. Stay tuned as this market develops.
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