A Bitcoin Selloff You Should Be Happy About

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A Bitcoin Selloff You Should Be Happy About

Bitcoin Moves Lower, Buyers Snatch Up Discount Coins

After posting a triple digit rally the inevitable happened. Bitcoin reached up, touched a key resistance level and unleashed a round of selling. The selling is a combination of profit-taking and lingering HODL’rs from 2020 and 2020 trying to get out while they can. The bad news is that the rally in Bitcoin is over, for now. The good news is that the move lower was met by significant buying and the outlook remains bullish.

A look at the hourly chart will show one of the biggest sell-offs in Bitcoin history just last night. This sell-off was sparked by a move $8,000 that touched the high of last July. The move wiped out more than 22% of Bitcoins value in just a matter of hours. Equally fast was the bounce back from support that has prices moving sideways and reconfirming support at a higher level. The new support is looking like $7000 which is a bullish sign. The $7,000 has been an important pivot point for the last few weeks.

A look at the daily chart is daunting. The BTC/USD has created a very strong bearish candle after touching resistance. The mitigating factors include evidence of strong support at the moving average and convergences in the indicators. Both MACD and stochastic set new highs alongside the new high in Bitcoin prices, an indication of market strength. The MACD peak is a multi-year extreme peak, a sign of market commitment and indicator of trend continuation. From that perspective we can expect to see BTC/USD at least retest the $8,000 level if not break on through to the other side.

The weekly chart is still bullish too. The candle and stochastic are showing signs of resistance within an uptrend and possibility of sideways movement. The MACD momentum is showing a steady increase in momentum that is likely to carry the coin up to retest $8,000 at least. A break above $8,000 would be very significant in the long-term perspective. The first target with reasonable assurance is $12,000 followed by $16,000 and then $20,000.

In the near term, traders should expect some consolidation. BTC may retest today’s lows, it will for sure move sideways within this new range for a day or two at least. A week or two, maybe even a month or two is more like it. the range is now $7,000 to $8,500. If one of the many catalysts on the horizon comes, say a BTC ETF or Bakkt goes live, you can expect to see BTC move sharply higher. Until then I expect to see a slow steady climb to $20,000 as we get closer to the halving.

FXDailyReport.Com

Bitcoin suffered its bloodiest day in the past seven years as its price plunged by close to 29 percent in just 30 minutes.

The leading cryptocurrency hit an intraday low of $5,578 shortly after the London morning bell, crashing steeply as traders liquidated more than $700 million worth of long positions on BitMEX. The downside move pushed bitcoin’s year-to-date performance in negative territory, negating all the gains it had made at the beginning of this year.

BTC/USD plunges by $2,000 as traders exit positions on Coronavirus fears | Source: TradingView.com, Coinbase

The crash was not an accident. So it appears, the plunged maximized after weeks of bitcoin’s gradual bearish moves as traders assessed the rising number of Coronavirus cases in the US and rest of the world. Yesterday, the World Health Organization (WHO) declared the event a “global pandemic.”

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Hours later, President Donald Trump announced in a televised address that the US is putting trave restrictions on Europeans, driven by Italy’s disappointing efforts to tackle the virus. A combination of all the negative events hammered down global stock markets, with equities across Asia, Europe, and the US all plunging into their bearish territories.

Even gold, which is perceived as safe-haven in the times of an economic crisis, fell sharply. At the same time, the US dollar index and bonds surged, turning into the only insurance assets to have moved upwards against the Coronavirus pandemic. That led many to believe that investors turn to cash more than bitcoin or gold in times of pandemics.

The fact that Treasuries, munis, and gold are getting hit tells me that everything is for sale right now. One giant margin call where even the safe-havens aren’t safe anymore. Except for cash.

The Failure of Bitcoin’s Technical Indicators

Coronavirus has put bitcoin in a unique situation. The cryptocurrency came into existence when the market was attempting to recover from a recession back in 2008. And it grew exponentially ever since, never having to be in the middle of another financial crisis, until now.

It is, therefore, wiser for traders to partially shift their strategies per global market catalysts. For instance, the Federal Reserve announced to inject $1.5 trillion worth of temporary liquidity into the system but the stock market still remained red. That shows how investors are no longer treating stimulus packages as a way to flip their near-term downside sentiment.

On the other hand, bitcoin is testing support at $6,000, a very strong floor as seen during the 2020’s crypto bust. But its ability to hold the level totally relies on additional liquidity which, unfortunately, is missing as people prefer to hold cash over other assets.

Fed’s trillion-dollar cash injection may help but the situation can only improve for real once the Coronavirus is contained. Therefore, it would be too risky to rely on bitcoin’s technical indicators in these unique times. The cryptocurrency could face more pain ahead if the virus risks grow further on investors’ sentiment.

Bitcoin Continues To Trade In Breakout Territory After Today’s Selloff

Bitcoin (BTC) got seriously smashed last night. Bitcoin lost 12 pct from $7350 to $6450 in some 12 hours. How concerned should crypto investors be? The answer is simple: Bitcoin continues to trade in breakout territory on its long term chart, even after today’s selloff.

In fact Bitcoin’s sell off was a double decline, first from $7350 to $6950, then followed by $6950 to $6450, both in 12 hours. Although Asian trading hours typically tend to show (strong) rises during the day it now as the opposite that happened.

Things can go hard in crypto land, not only to the upside (last year) but also down (as lots of investors experienced the hard way in 2020).

How concerned should crypto investors be? What does this mean for altcoins which are selling off even harder? Two separate questions, let’s address them one by one.

Bitcoin’s trades in breakout territory. Reason to be concerned with this selloff?

We believe any intuitive reaction to look for news in why and how Bitcoin declined is meaningless. If anyone is able to submit a good news item or article that ‘explains’ this selloff we are happy to read it. But news is simply not designed for this.

Our ‘start with the chart’ principle is the only one that applies until proven otherwise.

So far, Bitcoin’s daily chart continues to show some sharp moves up and down. That’s why we have to zoom out to find the big picture trends. Only once big picture trends are damaged is there really reason for concern. So overall we stick to our End of 2020 Bear Market Confirmed, Buy Signal Confirmed statement from last month as well as our 5 Must See Charts Confirm Bitcoin Bull Market Of 2020.

Right now, even with the 12% selloff of last night, the long term trends and patterns are still intact.

On the one hand support levels were not damaged, not rising support nor horizontal support.

On the other hand the breakout from last July was not invalidated neither.

Most likely Bitcoin is doing another test of recent lows. It might even become the 7th test of the important $6k level. Note as well that $6k is not a price point, it’s more of a level (say $5.6k to $6.2k).

Bitcoin’s selloff: what does it mean to altcoins?

Most altcoins have been selling off harder than Bitcoin. That makes sense, as there was also (much) more leverage to the upside. Remember when Bitcoin was rising fast end of last year? Altcoins were rising faster.

The point we are trying to make is that Bitcoins is the leading indicator. As long as Bitcoin remains in its long term bull market it will certainly help altcoins recover at a certain point once bullish momentum returns.

However, our stance has always been that 80% of altcoins is worthless. You better do not hold them as, over time, with each and every selloff, they will gradually lose more value compared to the ones that do deliver value.

For now we see no reason for crypto investors to panic as long as they are invested in the ‘right’ cryptocurrencies. As long as Bitcoin trades above $6k, with secondary (and strongest) support at $4.5k, there is still a long term bull market, and the strongest altcoins will eventually recover!

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