Welcome, all to What is happening with Bitcoin? I’ll be releasing a weekly analysis on bitcoin focusing on important price levels and bitcoin’s outlook for the upcoming week. This article is for you if:
- You are a crypto enthusiast and want to learn about the world of trading analysis
- You want to learn more about market dynamics and the crypto sphere
- You are thinking about buying or selling crypto in the next weeks
This analysis will be focused on Technical Analysis. Technical Analysis is a technique used by traders to identify trends from price action. Essentially, you collect price data to construct technical indicators to forecast a price chart outlook. Technical analysis is only one part of many factors that drive the price. Especially in crypto, there is a huge community factor, legal regulations, the macro environment (stock market, world politics, …), on-chain analysis, and technical issues (51% attack, hacked exchanges,…) that can cause panic or excitement in the market.
One basic part of technical analysis is the support and resistance level. These are significant price levels that act as barriers because bitcoin can either revert or pause at the said level. You can use these barriers and try to better plan your buy and sell actions. Opening a position in the middle of the range (between support and resistance) is often not the best strategy. Be patient, set an alarm at support and resistance, and remember to buy at support and sell at resistance.
Where are we now and what happened last week with Bitcoin?
We started the week with the wrong foot by failing to cross above $10,947 (resistance) and dropping to test our new significant price level at $10,700. Even though bitcoin began the week in the red, it wasn’t sure if $10,700 was going to hold due to increased selling pressure caused by the BitMex debacle. Until Thursday, bitcoin shattered through, and thus $10,700 claimed its title as our new midrange.
What happened outside of crypto?
Bitcoin continues to outperform gold and equities as we closed September +45% YTD. Systematic risk is increasing, however, and it can take its toll on Bitcoin’s progress. We continue to see the impact of COVID-19 in the economy and the 2020 election is coming up, thus there is a lot of uncertainty over Q4 2020. Yet, bitcoin’s volatility continues to decrease as opposed to that of equities. What is worrying is the fact that bitcoin appears to be fluctuating with the SP 500 while gold decouples. So, if the SP500 continues to stumble after Trump tested positive for COVID, bitcoin may follow.
Where is Bitcoin going next week?
To get a picture of where bitcoin will be trading next week, we need to use two timeframes to see if bitcoin continues to trade above our long-term support (bullish sign) and where the short-term trend sees bitcoin this week.
Long-term, bitcoin remains bullish! Even though September is probably the worst month for bitcoin we managed to stay above our monthly midrange level ($10,500). Meaning that if we close this week above the said price, we can expect further gains, a new bottom, and a higher low. However, after multiple failed attempts at our monthly resistance ($11,100), we can’t confirm anything until we close a week within the 11k range.
When we zoom in to a higher frequency chart (4-hour chart) we can see that bitcoin’s volatility is squeezing resistance and support levels towards our monthly midrange ($10,500). If volatility keeps decreasing or does not spike, we expect bitcoin to trade within $10,947 and $10,377. Notice how these price levels continue our squeezing trend because resistance is at a lower high, but support is at a higher low. If bitcoin manages to stay above 10.7k odds are we are going to retest $10,947 once again due to increasing buying pressure. Considering that we have not broken through the downward trend it is also likely that bitcoin drops below support ($10,377) and makes an attempt at our monthly support level.
Next week’s trading channel is pretty clear, if bitcoin continues to consolidate, we expect bitcoin to trade between $10,377 and $10,947. If you want to keep an eye on bitcoin’s progress, set alerts at the following significant price levels:
- Resistance $10,947
- Midrange $10,700
- Support $10,377
But as long as bitcoin remains within our range, we can continue to enjoy our weekend.