BTC Severely Punished in First Recession Ever. Far From Over!
Here on the weekly Bitcoin chart, we can see that a few things have happened since the last BTC analysis. Firstly, we can see that BTC is holding above the 200 week moving average (in purple) at the moment. This is extremely important for the bulls, because Bitcoin has never really broken down below the 200 week in any meaningful way.
You can see that earlier this month, BTC broke substantially below the 200 week MA (falling as low as 3850) but each week closed near or slightly above that moving average, which is currently near 5600. However, we aren't seeing a huge bounce off of the 200 week just yet. In fact, Bitcoin has practically spent the entire month testing the 200 week region.
There is a lot more going on there than just the 200 week moving average. You can see that the top of the blue downtrend channel is also right there. That channel has been on my BTC charts for about a year now. You can see that after BTC broke out above it in May of 2019, it tested the top of the channel all the way through June, before rallying from 6400 to 13800. Now, we're basically testing the top of the downtrend channel for support again, and so far it has held.
Despite BTC's current hold of the 200 week, things aren't all rainbows and butterflies here. You can see that each of the last three weekly candles has closed at or below the lateral red resistance level. In 2018, that level acted as major support. However, we're now caught up in it again, and if BTC can't get back above it, it will continue to be resistance. Last week's candle is particularly interesting. You can see that it has a very long upper shadow and virtually no body, and it closed and opened near the bottom. This candle is called a gravestone doji. A gravestone doji can be described as "a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow suggests that the bullish advance in the beginning of the session was overcome by bears by the end of the session, which often comes just before a longer term bearish downtrend."
So, we can see that was the case in last week's candle. However, for confirmation of a return to the downside, we would need to see this week's candle close lower, preferably below the 200 week MA.
Probably the most important consideration for the immediate future of BTC's performance is the stock market. Bitcoin and cryptocurrencies have CLEARLY been beaten down as stocks have been punished over coronavirus. The world is now in recession, and it will likely get worse as the COVID-19 case count continues to accelerate globally. Furthermore, I suspect that we could see after effects, such as a real meltdown in the credit markets, due to extraordinary risk exposure and an exponential widening of credit spreads. In other words, I think that stocks are nowhere near bottom. The rally that we've seen recently in stocks is likely just a technical bear market rally, and I expect that stocks will roll back over to the downside, as the major indices get rejected by their 200 week moving averages. So, if stocks are going to continue lower, there is a big chance that Bitcoin and all of crypto will continue to fall as well.
I know a lot of people don't like to hear that, but the truth is that crypto is extremely risky. Investing in crypto is probably one of the most speculative and risky things you can do with your money, especially given the massive volatility that regularly exists in the crypto space. Not to mention the fact that these technologies aren't even being used in any economically meaningful way. Meaning, the entire space is only worth $176 billion. That's really nothing relative to the global economy. Regardless of that, investors simply don't want to be in risky investments during a recession. That's why stocks are sold — because they're RISK ON investments, and cryptocurrencies are some of the biggest RISK ON investments available.
Think about it this way. If you lose your job or take a pay cut (as many people do in a recession) and you still have to pay your bills and put food on your table, what are you going to do with that measly dwindling crypto investment? Most people are living paycheck to paycheck. As the pressures of recession continue to mount, many retail investors (HODLers) will come to a realization — either cut your losses in crypto or face severe investment losses on top of the job loss/pay cut. Last week the US saw the largest unemployment leap in history. Over 3.25 million people filed for unemployment last week. Those numbers are likely to get worse over time, and that's JUST the US.
Bitcoin's performance in the wake of the coronavirus outbreak has been pitiful. At it's worst, it fell 65% from early February, when the coronavirus outbreak news really started to take hold. So, I wouldn't be surprised if we see BTC break down below the 200 week MA, for the first time ever. I think it could easily dip into the 2000s, and potentially lower. This is the first recession Bitcoin has ever been in, and it is already getting destroyed, as I always believed it would. As the global recession continues to worsen, Bitcoin and crypto should continue to fall.
I'm The Master of The Charts, The Professor, The Legend, The King, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
You can see that earlier this month, BTC broke substantially below the 200 week MA (falling as low as 3850) but each week closed near or slightly above that moving average, which is currently near 5600. However, we aren't seeing a huge bounce off of the 200 week just yet. In fact, Bitcoin has practically spent the entire month testing the 200 week region.
There is a lot more going on there than just the 200 week moving average. You can see that the top of the blue downtrend channel is also right there. That channel has been on my BTC charts for about a year now. You can see that after BTC broke out above it in May of 2019, it tested the top of the channel all the way through June, before rallying from 6400 to 13800. Now, we're basically testing the top of the downtrend channel for support again, and so far it has held.
Despite BTC's current hold of the 200 week, things aren't all rainbows and butterflies here. You can see that each of the last three weekly candles has closed at or below the lateral red resistance level. In 2018, that level acted as major support. However, we're now caught up in it again, and if BTC can't get back above it, it will continue to be resistance. Last week's candle is particularly interesting. You can see that it has a very long upper shadow and virtually no body, and it closed and opened near the bottom. This candle is called a gravestone doji. A gravestone doji can be described as "a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow suggests that the bullish advance in the beginning of the session was overcome by bears by the end of the session, which often comes just before a longer term bearish downtrend."
So, we can see that was the case in last week's candle. However, for confirmation of a return to the downside, we would need to see this week's candle close lower, preferably below the 200 week MA.
Probably the most important consideration for the immediate future of BTC's performance is the stock market. Bitcoin and cryptocurrencies have CLEARLY been beaten down as stocks have been punished over coronavirus. The world is now in recession, and it will likely get worse as the COVID-19 case count continues to accelerate globally. Furthermore, I suspect that we could see after effects, such as a real meltdown in the credit markets, due to extraordinary risk exposure and an exponential widening of credit spreads. In other words, I think that stocks are nowhere near bottom. The rally that we've seen recently in stocks is likely just a technical bear market rally, and I expect that stocks will roll back over to the downside, as the major indices get rejected by their 200 week moving averages. So, if stocks are going to continue lower, there is a big chance that Bitcoin and all of crypto will continue to fall as well.
I know a lot of people don't like to hear that, but the truth is that crypto is extremely risky. Investing in crypto is probably one of the most speculative and risky things you can do with your money, especially given the massive volatility that regularly exists in the crypto space. Not to mention the fact that these technologies aren't even being used in any economically meaningful way. Meaning, the entire space is only worth $176 billion. That's really nothing relative to the global economy. Regardless of that, investors simply don't want to be in risky investments during a recession. That's why stocks are sold — because they're RISK ON investments, and cryptocurrencies are some of the biggest RISK ON investments available.
Think about it this way. If you lose your job or take a pay cut (as many people do in a recession) and you still have to pay your bills and put food on your table, what are you going to do with that measly dwindling crypto investment? Most people are living paycheck to paycheck. As the pressures of recession continue to mount, many retail investors (HODLers) will come to a realization — either cut your losses in crypto or face severe investment losses on top of the job loss/pay cut. Last week the US saw the largest unemployment leap in history. Over 3.25 million people filed for unemployment last week. Those numbers are likely to get worse over time, and that's JUST the US.
Bitcoin's performance in the wake of the coronavirus outbreak has been pitiful. At it's worst, it fell 65% from early February, when the coronavirus outbreak news really started to take hold. So, I wouldn't be surprised if we see BTC break down below the 200 week MA, for the first time ever. I think it could easily dip into the 2000s, and potentially lower. This is the first recession Bitcoin has ever been in, and it is already getting destroyed, as I always believed it would. As the global recession continues to worsen, Bitcoin and crypto should continue to fall.
I'm The Master of The Charts, The Professor, The Legend, The King, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-