tennant.graeme
Short

Bitcoin Price on Thin Ice

BITFINEX:BTCUSD   Bitcoin / U.S. Dollar
Bitcoin’s support zone between $6500 and $5750 has been under ceaseless attack throughout 2018 and on each occasion the buyers have come in to firm up the price, but are the cracks starting to widen? After a hard sell-off at the beginning of the month of September, Bitcoin's critical support zone (orange area) was once again tested and once again it held. This price zone is the thin ice that has staved off a plunge into icy depths which would surely make even the staunchest Hodler shiver!

It is clearly noticeable that the rally off the support zone has become weaker on each occasion. Currently, volatility is low relative to historical price action which is clearly illustrated by the narrowing of the Bollinger Bands . Low volatility is a precursor for impulsive price action, which suggests that spill to the downside from here may possess the required momentum to finally break through the resilient support zone .

Should we break through, I expect the price to fall hard and fast. Looking at previous levels of significance, I believe that likely areas of potential support exist at $5000 and $3000 (red dashed lines). Of course, it is also possible for the price to break out the prevailing bearish trend with a move to the upside. We will need to see the price move above at least the local high at $7500 and then $8500 before bulls can start to claim that the bearish trend is invalidated (blue dashed lines).

Bitcoin has had a torrid 2018 and whilst personally I am bullish on Bitcoin and crypto in general from a fundamental perspective, the harsh reality is that in the short/ medium term things can get worse. Bear markets that follow periods of extreme overperformance, as witnessed in crypto markets last year, commonly experience extended periods of underperformance. At least for now, a battered Bitcoin continues to tread warily above the icy crust, but a crack in the frozen surface is likely to give way to a hypothermic decent.
Very well explained idea. Great job! I think we need to brake support lines to have the market reach the despair phase in order to start the cycle again for even bigger highs. This has been a learning experience for me. Keep up the good work.
Cheers.
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@fernx, Thanks - appreciate the comment!
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