Bitcoin initially rallied on Wednesday, breaking up to the $18,500 level before giving back the gains, eventually closing the day just above the open around $17,800. Bitcoin put in a new high but promptly retreating, forming an inverted hammer, indicating bullishness was sold into, squashing any gains.
Outlook: Bitcoin lurched higher again on Wednesday, surpassing $18,000 before turning around and erasing nearly the entire rally, closing barely positive on the daily chart. Bitcoin has gone parabolic — there’s no way two ways about it. For most, this recent rally has exceeded mosts’ expectations and reminded us all of how bullish and rip roaring Bitcoin can be during bull markets. That being said, Bitcoin is overbought and overextended to the upside, and this rally is impressive, but impulsive and not sustainable.
I’ve mentioned before that there are a confluence of bearish factors on markets over the next month or so that should also have negative pressure on Bitcoin, and as equity markets look vulnerable and start to exhibit signs of weakness and institutional selling, I expect Bitcoin to realign with equities during periods of higher liquidity and volatility. In fact, as Bitcoin is considered a “surfeit” and risk-on asset, it is common for it to Selloff first relative to legacy markets, serving as a somewhat reliable leading indicator.
I’m expecting a pullback of at least a couple thousand dollars, possibly as low as $13,000 or more likely $14,000-ish. It’s possible Bitcoin has a blowoff top or Wave 5 of 5 extension up to the previous ATH at $20,000, but I think that should mark as the ultimate terminus to this impulsive rally.
Support: Look for support around $14,000, or frankly even $13,000 would be value at this point. The lower Bitcoin goes, the higher the chance of a violent bounce. On a late Nov/early Dec selloff, which is looking more and more sharp for Bitcoin given this blowoff top, I’m looking to buy dips.
Resistance: $20,000 is my target here on this rally. This is Bitcoin’s all-time high and a large, round psychological level. Any retail minnows who got sucked into the December 2017 mania and bought the top will likely be looking to break even, though that selling pressure will be a fraction compared to the technical selling after a full multi-year retrace. I think $20,000 is a tough resistance level that’ll put up a fight possibly into Q1 2021, but will eventually fall as crypto in 2020-2021 is completely different and more evolved than speculation mania in 2017.
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