Bitcoin fell on Wednesday, dropping down to the $34K level before turning around and recovering to about the $35K at the close. This is a bearish candle and leads me to believe that this tightening wedge on the Bitcoin daily chart may break out to the downside.
(January 20, 2020 7:30PM EST)
Bitcoin pulled back on Wednesday, losing just over $1,000 to finish the day with an ugly-looking bearish candle mid-way through the week.
My primary view of a Bitcoin double-top and sustained correction appears to be valid and possibly playing out. Bitcoin put in a lower low today as the tightening wedge pattern that's been developing may be terminating, and if today was any indication then it looks like the near-term path of least resistance is down. Additionally, traditional market moves such as the recent strength in the US dollar and a wave down to $1,800 in gold has not been supportive for Bitcoin lately. However, today gold recovered nicely and the US dollar was flat, so it's somewhat concerning that Bitcoin wasn't buoyed by gold's action or at least flat. Based on that and continued short-term uncertainty, I think we could see lower prices in the short-term to a high low in the high $20,000s where the buyers step in to BTFD, allowing Bitcoin to continue higher.
Going forward my modus operandi is to buy on dips, DCA a small amount weekly, and even earn Bitcoin if you can. The path of least resistance is up; don't try to fight it unless you're willing to get burned.
Support: Look for support around $30K (38.2% fib) and then $25K (50% fib). Anything lower than that is a screaming buy, though I'm not even sure we'll see $25K again.
Resistance: $40K remains immediate near-term resistance. If Bitcoin breaks above $40K, look for $45K, and then $50K. After that, we'll probably move in $10K increments.
It's worth noting that somewhere around ~$52K Bitcoin's market cap will equal $1 trillion, so at that point, I think we could also see a selloff. However, any rally thereafter should be further supported as a $1T market cap would give the green light for many more conservative institutional investors to initiate Bitcoin positions as Bitcoin will finally be "big enough" for them to even add an allocation.
