Bitcoin (BTC) price dropped from the downward triangle, causing an extreme level of fear to spread across the entire crypto market. Bitcoin price has remained bearish at $13,800 since the top, as the price in a channel has gone downward. However, is the total or only short-term price of Bitcoin bearish? The feeling of the crypto market registers extreme fear Index of Crypto Fear & Greed.
Currently, the Crypto Fear & Greed Index shows extreme fear on the market. The index is based on volatility (25%), momentum/volume of the market (25%), social media (15%), surveys (15%), dominance (10%) and trends (10%). The index is generally a good indicator to be used in technical analysis as it describes the general feeling. At the moment, with a number of 12 out of 100, the feeling is extreme fear. During the bearish period from December 2018 – February 2019 and during the sudden price drop in mid-August this year, these numbers were only seen. As Baron Rothschild once said: “Buy when blood is on the streets, even if it’s your own blood,” adds value to this indicator. This will provide buying opportunities when markets are in extreme fear, and when markets are euphoric or greedy (e.g. your local Uber driver is starting a Bitcoin conversation), it’s time to get out. What is important to concentrate on now is whether this fear is justified or whether the macrostructure is still upward? Bitcoin’s macroview 1-week BTC/USD chart.
Bitcoin broke down from the downward triangle and couldn’t hold the 21-Week Exponential Moving Average (WMA), causing the price to fall back to around $8,000 for the next support zone. Losing the 21 WMA resulted in a replay of the next crucial level at the 100-Week Moving Average (WMA) In previous market cycles, the 100-WMA was tested before a major uptrend began. The 100-WMA currently hovers around $7,800 and is still below the current price. From the macro perspective, one could conclude that as the 2018 bottom was $3,400, the market is still moving upward. Bitcoin’s eye of a bird 1-day BTC/USD chart.
As Bitcoin fell below $9,300-9,400 support, a significant chain reaction caused the price to drop rapidly to $8,000 (green zone) immediately. For a number of reasons, this drop is important. One of them is the completion of the descending wedge, which is 3 months old. The drop below $9,300 completed the play of the triangle and indicated Bitcoin’s direction. The first reaction is that because of the loss of crucial support, people start panic selling their Bitcoin. The immense amount of stop/loss orders placed under the important support is another reason. Once this triggered, due to the high volume of sales, the market dropped. Bitcoin then dropped to $8,800 through soft support as the high volume of sales pushed the price to $8,500. The next level of support from there is the level on which the price now rests, the horizontal area around $7,800-8,000 and the 100-week MA. The VPVR (Volume Profile Visible Range) indicator shows where support and resistance are placed at high volume levels and the next big orders. During drawdowns, this indicator can provide great information as it shows the next support level. The indicator now provides information that the price rests on a substantial order block. Breaking up might lead around $9,400-$9,800 to the next “bigger” block. Scenario of Bearish Daily chart of BTC/USD.
Bitcoin is clearly in a downward trend, and the bearish scenario is quite simple. Losing the 100-WMA and losing this support block would lead to the next $7,300-$7,600 support area. Essentially, if the market can break up with a weak volume bounce, the price could still make another major drop that could be interpreted as a $8,800 bearish retest. Watching the movements in the coming hours/days and their strength is key, as they can tell a lot about the short-term direction of the market. Ultimately, it would be extremely bad for Bitcoin in general to lose the trend here (the whole channel). Scenario bullish Daily chart of BTC/USD.
It is preferable in the short term to keep Bitcoin within the horizontal area and 100-WMA before moving up to the resistance of $8,800. If the price can do this, the trend is still valid and there is also still the macrostructure with higher lows. The bulls need to reclaim $8,800 and preferably $9,400 to look stronger for significant bullish perspectives. If the price starts “grinding” up to $8,800 without any volume, it’s more like a bearish retest than a new upward trend. It can be argued that combined with the crypto Fear & Greed Index, the RSI indicator (Relative Strength Index) shows that the market is overwhelmed by fear and ready to press the sell button. A slight upward bounce could trigger FOMO’s return to the market and could generate volume to push the price above the levels of resistance to $8,800 and $9,400. Up to $6K still bullish The bullish overall market structure remains in place, even though the market is moving back to $6,000. That would result in a higher low on higher timelines and could indicate a trend upwards (macro view). Would that mean the market is unable to see further downward short-term movements? This is possible. Halving event in May 2020, however, is about 230 days away, historically providing a bullish rally around the event. In addition, if the current price action provides a “beartrap” and the market needs to bounce rapidly to generate the investor FOMO waiting to buy back in.
If this does not happen, it may be possible to test some lower levels before a short-term reversal. Notably, 75% of the time the price of Bitcoin drops before the expiry date of the futures and this expiry date is Friday, September 26. In addition, in a matter of days, a new monthly candle is coming up. Both of these events, like Bitcoin, could provide volatility and surprises.