Bitcoin sold off on Thursday, dropping hard from $19,000 level down to as low as the $16,000 level before finding support, bouncing up to about the $17,000 level by the close of the daily candle. This is, of course, an extremely bearish candle, puking up over a week's worth of gains in a matter of hours, and almost certainly pointing to more weakness ahead.
Outlook: Bitcoin sold off on Thursday, shedding nearly $3,000 before finding a bit of support, settling the daily candle around $17,000 for a 10%+ loss on the day. We have been anticipating a retracement for a few days now, looking for a pullback near resistance at the 2017 ATH to higher support around the $14,000 level, give or take a thousand dollars. This comes as no surprise, as Bitcoin went nearly vertical for almost two months straight, which is, of course, unsustainable in any market, and that sort of exuberant behavior always ends poorly. In fact, this is nearly picture perfect from our perspective based on our observations, as this perfectly reflects how markets take the stairs up and the elevator down. Going forward, I think Bitcoin sees continued weakness into the long weekend, as US markets are closed due to Thanksgiving and won't reopen until Monday. This results in thinner liquidity and markets are more prone to bigger moves and even manipulation due to thinner orderbooks. This was a perfect setup for a drop, and if you're following us, you were looking to take profits and anticipating a blowoff top or more likely, a large pullback.
From here, I think Bitcoin continues down in the short-term to around the $14,000 level, which is the top of a recent consolidation range in mid-October, arguably the last significant fibonacci level before $20,000, and near the 50 Day EMA around $14,500.
That being said, I'm not a seller of Bitcoin whatsoever, but I do believe in the short-term, BTC is likely to continue exhibiting weakness, which is fair given the parabolic rally of almost two months. It's time for Bitcoin to cool off a bit and digest the gains. In the background, the global economic backdrop is still extremely bearish, which is supportive for assets with qualities like Bitcoin. In the medium to long-term, I expect Bitcoin to not only rebound from this selloff but to rally to substantially higher levels into next year and beyond.
Support: Look for support around $15,000, $14,000, or even $13,000 if we're lucky. On a weekly timeframe, I think a 30% retracement here is a median-sized pullback, and there are a semi-truck load of bearish socio-economic catalysts primed and ready to shake up markets over the next few months -- hell, few weeks. That said, I think Bitcoin can go as low as $12,000 before finding strong support, at which point I am a strong buyer, but I think that's as low as it goes, if it even gets there (unlikely).
Resistance: $20,000 remains firm resistance, which makes sense as it's the previous ATH. When BTC breaks above $20,000, which, given this selloff, probably doesn't occur until Q1 2021, I'll be looking for a quick run up to $25,000 and then $30,000. In the mean time, Bitcoin will have to fair with slightly lower levels now as it sees a short-term pullback away from $20K.
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