Bitcoin fell again last week, bouncing back and forth in its tight $1,000 range before ultimately receding $500. Bitcoin has maintained its price level above the $10,000 level for over 2 months now, although recent weeks has seen a downward-sloping short-term trend retesting $10,000 as support. This is not a bullish looking formation whatsoever, so I expect continued short-term weakness before bouncing off a hard line of support.
(October 4, 2020 8:00 PM EST)
Support: Bitcoin remains trading above the 50 and 200 Week EMA's, which should act as significant long-term support below at ~$9,368 and $6,829, respectively. If Bitcoin were to fall off a cliff and drop below the $10,000 level, look for deeper wallets to step in to buy around the 50 Week EMA and then finally the 200 Week EMA. If Bitcoin falls below that, the uptrend is in question.
Resistance: Looking ahead, Bitcoin is a buy on the dips scenario, with medium- and longer-term investors looking to add on pullbacks, particularly the $10,000 and ultimately $9,000 levels below, which should be strong support. Next immediate resistance overhead is the July 2019 highs around $14,000. The good news is that $14,000 is probably the last stop before Bitcoin runs up to new all-time highs around $20,000, as there should not be many sellers between $14,000 and the previous all-time highs around $20,000 US. Longer-term, the sky is the limit for BTC, especially if the Lightning Network Upgrade is implemented in the next 12 months to accommodate new money entering the market and mitigating high transaction fees. One positive note is that once Bitcoins breaks $12,000 and then $20,000, it should be a quick run up to $30,000 or $40,000, as there will be little selling resistance. In fact, there might be a surprising amount of buy orders set around the $50,000 level as it is only around that price valuation and market cap that institutions will view Bitcoin as an asset class with sufficient liquidity to dabble with.
Outlook: Seasonal liquidity has been low the past few weeks and should only just this week start to reenter the markets. Additionally, if seasonality is of any indication of what's to come in the near future, late Sept and October tend to be volatile and red months, pointing to a trough in markets over the next few weeks leading up the US election. There is a lot of fear, uncertainty, and doubt in the air right now with COVID upticks starting to happen in the UK and colleges all over, civil unrest in the US, a looming US election with major implications, and the central banks around the world printing trillions of dollars into the currency supply, AND President Trump and First Lady being hospitalized for contracting COVID19. I see more weakness in all markets, Bitcoin included, over the next couple few weeks, with a local bottom striking probably in mid- to late-October. The recent price action leads me to believe that any rallies over the next few days are stop-hunts for shorts and longs exiting at shorter timeframe EWT wave 5s, at which point the selling will resume and short-term weakness will continue. On the bright side, I will be looking for a medium-term bottom and value price level to DCA into more BTC and ETH before an expected late market recovery to end the year into 2021. One thing we're already seeing from rampant money printing is the appreciation and preservation of assets relative to the USD. What this means is, in a normal inflationary market (2019, for example), Bitcoin, gold, and equities prices would probably be lower because the trillions of USD that has only recently been added to the overall circulating supply did not exist. However, now that it does, and governments around the world continue QE at this pace, it's almost essentially putting in a 'floor' or 'life vest' for assets. Therefore, Bitcoin's pullbacks, which are notorious for being deep, may be a little more shallow this time around before catapulting to new highs in probably 2021-2022.
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