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Crypto traders outline likely outcomes

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The price of Bitcoin (BTC) is approaching the last weekly candle for the month of August. Some traders believe Bitcoin’s performance over the next two weeks could decide whether its price drops below $10,000 again or sees an extended uptrend.

The week’s weekly candle close coincides with the expiration of CME’s Bitcoin futures contracts and Deribit’s options contracts. It could potentially set a precedent for September, especially if Bitcoin closes above or below key levels.

In the short term, technical analysts generally consider $11,800 as the key level for Bitcoin. A high time frame close below the level would raise the chances of a deeper pullback. A close above it, maintaining a green monthly candle, could cause Bitcoin to see another leg up.

Mohit Sorout, a founding partner at Bitazu Capital, said in a tweet that a rally to $11,800 would “put sellers to sleep.” Sorout referred to the daily chart of Bitcoin with Bollinger Bands, showing the area of interest for both sellers and buyers.

With just a few days left until the monthly close, the Bitcoin futures market remains cautious. Typically, the number of long contract holders in the futures market outweigh short-sellers. Data from Bybt shows longs represent 53.36% of the market, which shows traders are cautious, heading into September with three major scenarios on the cards. 

The short-term bullish scenario for Bitcoin

For Bitcoin to maintain its upward momentum in the near term, traders say BTC’s price primarily needs to recover back above the $11,800 support-turned-resistance level. If that happens, traders foresee another potential move to $12,500. However, some other traders believe that the major support trendline of Bitcoin places the next support area at around $10,900. Thus, if BTC stays above the $10,900-to-$11,500 range, it would maintain its short-term bull scenario.

A cryptocurrency trader known as “John Wick” believes investors are not considering the higher time frames, as the weekly chart, which uses Bitcoin’s $3,600 bottom in March and $9,130 local bottom in July as basis points, shows a supporting trendline. As long as the trendline does not break intensely in the short term, the trader hinted in a tweet that this could be an optimistic market structure.

Weekly Bitcoin chart

Cryptocurrency analyst Nunya Bizniz suggested a similar scenario in a higher time frame. If the current monthly candle structure follows previous formations, the analyst said there is a chance it marks the start of a newfound bull run. That would indicate that Bitcoin’s price potentially sees a stable climb over the next six to 12 months, tweeting:

“BTC Monthly: VWAP anchored to previous cycle highs. A successful retest of the AVWAP has lead to bull markets. Does the current month satisfy the retest and will it lead to a bull run [this] time? Note: Grey vertical line = halving.”

However, one variable in the expectations of a 2017-like rally is that the second halving occurred in mid-2016. If a similar trend were to emerge, the chances of Bitcoin seeing a proper rally are higher in late 2021, rather than during the upcoming winter.

BTC’s cautiously bearish case

In the short term, traders started to show signs of caution following Bitcoin’s drop below $11,500. A trader known as “Mayne” said that the initial decline of Bitcoin to $11,400 is not a trend bulls want to see. Since then, Bitcoin has seen a consecutive lower high pattern, which typically shows slowing momentum. Mayne tweeted: “Price with a false break high and now stair stepping down. Last 2 up moves seem like clear bearish retests. If this is distribution, expect the selling to pick up speed soon. Bulls need to come in and regain $11.7.”

The daily chart of Bitcoin with key levels

A lower high formation refers to when the price peaks at a lower price than the previous high. Bitcoin’s daily candle closed at $11,748 on Aug. 24, while the following three daily candles all closed under $11,500, forming a lower high pattern. Bitcoin would have to break above $11,800 to cancel out the lower high pattern, which makes it a critical short-term level.

The slowing momentum of Bitcoin since its peak in mid-August coincides with declining address activity. CNBC’s Brian Kelly have used the daily address activity on the Bitcoin blockchain as a key fundamental metric for some time. Since May, the address activity on the Bitcoin network has noticeably declined, as data by Santiment shows it has dropped by nearly half, clarifying that the decline in address activity is a sign of caution that network activity is seeing a slump. The company tweeted: “The -3.7% price was surely related to this metric’s -19.3% decline since its peak of 1.13M active addresses back on August 6th.”

The confluence of lower highs on the daily chart, slowing fundamental metrics and the consolidation of Bitcoin under $11,800 is seemingly swaying the market to become more cautious.

Stagnation

As an alternative scenario, some investors believe Bitcoin could see months of low volatility before the next big price movement. Dan Tepiero, a co-founder of 10T Holdings, said that every price cycle in the past took around 800 to 1,100 days to complete. Bitcoin is currently less than 400 days into the cycle, which indicates that BTC could range sideways for the next three to 12 months. 

Bitcoin price cycles and their lengths

If the price of Bitcoin continues to remain stagnant, some foresee an extended altcoin season. The Bitcoin dominance index is a concern for altcoins in the foreseeable future, as it is approaching key technical support levels. But, historically, altcoins have prospered during a Bitcoin consolidation phase.

Related: Alt season is here? DeFi tokens taking on Bitcoin for crypto dominance

Tepiero urges everyone to be patient with Bitcoin, tweeting: “Each up cycle takes longer to play out and is less extreme as absolute dollar value gets much larger. May or may not be another 6-12 months before price breaks up. Should not matter as end price point obscenely higher. Hodlers rejoice.”

Traders remain mixed as Bitcoin enters September, which, historically, has been a slow month. In previous years, BTC often saw an uptrend in August, followed by consolidation until November. The tendency of BTC to stagnate throughout the last quarter of the year is reflected by the lack of decisiveness in the futures market.





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Bitcoin may lose $30K price level if stocks tank, analysts warn

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The ghost of stock market crash is back again to haunt Bitcoin (BTC).

It happened last in March 2020. Back then, the prospect of the fast-spreading coronavirus pandemic led to lockdowns across developed and emerging economies. In turn, global stocks crashed in tandem, and Bitcoin lost half of its value in just two days.

Meanwhile, the U.S .dollar index, or DXY, which represents the greenback’s strength against a basket of top foreign currencies, has now climbed by 8.78% to 102.992, its highest level since January 2017.

The huge inverse correlation showed that investors dumped their stocks and Bitcoin holdings and sought safety in what they thought was a better haven: the greenback. 

More than a year later, Bitcoin and stock markets again wrestle with a similar bearish sentiment, this time led by a renewed demand for the U.S. dollar following the Federal Reserve’s hawkish tone.

Namely, the U.S. central bank announced Wednesday it will start hiking its benchmark interest rates by the end of 2023, a year earlier than planned.

Lower interest rates helped to pull Bitcoin and the U.S. stock market out of their bearish slumber. The benchmark cryptocurrency jumped from $3,858 in March 2020 to almost $65,000 in April 2021 as the Fed pushed lending rates to the 0%-0.25% range.

Meanwhile, the S&P 500 index rose more than 95% to 4,257.16 from its mid-March 2020 peak. Dow Jones and Nasdaq rallied similarly, as shown in the chart below.

Bitcoin, Nasdaq Composite, S&P 500, and Dow Jones rose in sync after March 2020 crash. Source: TradingView.com

And this is what happened after the Federal Reserve’s rate-hike announcement on Wednesday…

Bitcoin and the US stock market plunged after the Fed’s rate hike update. Source: TradingView.com

Meanwhile, the U.S. dollar index jumped to its two-month high, hinting at a renewed appetite for the greenback in global markets.

U.S. dollar index jumped up to 2.06% after rate hike announcement. Source: TradingView.com

Popular on-chain analyst Willy Woo said on Friday that a stock market crash coupled with a rising dollar could increase Bitcoin’s bearish outlook. 

“Some downside risk if stonks tank, a lot of rallying in the DXY (USD strength) which is typical of money moving to safety,” he explained. 

Michael Burry, the head of Scion Asset Management, also sounded the alarm on an imminent Bitcoin and stock market crash, adding that when crypto markets fall from trillions, or when meme stocks fall from billions, the Main Street losses will approach the size of countries.

“The problem with crypto, as in most things, is the leverage,” he tweeted. “If you don’t know how much leverage is in crypto, you don’t know anything about crypto.”

Burry deleted his tweets later.

Some bullish hopes

Away from the price action, Bitcoin’s adoption continues to grow, an upside catalyst that was missing during the March 2020 crash.

On Friday, CNBC reported that Goldman Sachs has started trading Bitcoin Futures with Galaxy Digital, a crypto merchant bank headed by former hedge fund tycoon Mike Novogratz. The financial news service claimed that Goldman’s call to hire Galaxy as its liquidity provider came in response to increasing pressure from its wealthy clients.

Related: Hawkish Fed comments push Bitcoin price and stocks lower again

Damien Vanderwilt, co-president of Galaxy Digital, added that the mainstream adoption would help Bitcoin lower its infamous price volatility, paving the way for institutional players to join the crypto bandwagon. Excerpts from his interview with CNBC:

“Once one bank is out there doing this, the other banks will have [fear of missing out] and they’ll get on-boarded because their clients have been asking for it.”

Earlier, other major financial and banking services, including Morgan Stanley, PayPal, and Bank of New York Mellon, also launched crypto-enabled services for their clients.

Is Bitcoin in a bear market? 

Referring to the question “are we in a bear market?” Woo said that Bitcoin adoption continues to look healthy despite the recent price drop. The analyst cited on-chain indicators to show an increasing user growth and capital injection in the Bitcoin market.

He also noted that the recent Bitcoin sell-off merely transported BTC from weak hands to strong hands. 

7-day moving average of coins moving between strong and weak hands. Source: Willy Woo

Woo reminded:

“My only concern for downside risk is if we get a major correction in equities which will pull BTC price downwards no matter what the on-chain fundamentals may suggest. Noticing USD strength on the DXY, which suggest some investors moving to safety in the USD.”