We’re Not Falling Into the FUD Fog; Here’s Why ...
I’m sure you’ve already seen the action in the market today. Bitcoin (BTC, Tech/Adoption Grade “A-”) has fallen six out of the last seven days. This morning, it looked poised to add to that trend.
The King of Crypto fell from just under $36,000 all the way to a low of about $28,805 this morning. That means that Bitcoin actually set a new low lower than the previous low established on May 19.
As you already know, lower lows pave the way for a downtrend.
As often as we say that crypto is a volatile market, it’s still scary to investors who are new to the space when they experience it for the first time. It’s scary for more experienced traders, too.
But the only way to dispel that fear is to understand what’s happening ... and why our team is still bullish in the long term.
So, let’s take a look at what today’s weakness can mean — the good, bad and ugly of it all.
We’ve said for a while now that the lows established last month represent the end of the third, “bullish” phase of the four-year crypto cycle. Next up should be the “parabolic” phase. But first comes a period of consolidation.
Drops like this in Bitcoin certainly may not feel like simple consolidation. But the long-term fundamentals haven’t changed, leading us to believe it is.
There is certainly a risk that Bitcoin may slip further from here as it continues this downtrend. The key mark that we are watching for is a close below $30,000.
Cryptocurrency markets operate 24/7, so what do I mean by “close?”
Midnight Coordinated Universal Time (00:00 UTC) is considered “closing time.” If Bitcoin is trading below $30,000 at midnight UTC, then we could see the No. 1 crypto by market cap continue to slip back to its next downside support level, around the low $20,000s.
Looking at the volume, it’s even possible that BTC may find solid support down by its previous all-time high near $19,000.
But this would be the worst-case scenario based on our estimates. We would expect strong volume from the bulls near $20,000.
That’s because historically, Bitcoin has never fallen below its previous bull market high, so a fall below $19,000 would be unprecedented.
If there is anything we know about Bitcoin, it’s that it tends to repeat patterns, and a fall below $20,000 would contradict that.
So, that’s the bad and the ugly. Now, it’s time to turn to the good.
Because there is good mixed up in here. Bitcoin has bounced considerably from the morning lows and stabilized near $32,500. That’s a good start.
In order to stop this slide, BTC needs to climb back above the next resistance level, around $34,500, before it faces resistance yet again at $36,000.
Breaking above that $36,000 level in the next 24 hours or so should stop the bleeding.
The bulls need to show up for this to happen, though, and we haven’t seen much buying volume in recent weeks.
Since Bitcoin tends to lead the whole cryptocurrency asset class, all eyes are on the King of Crypto. There likely won’t be much buying volume in altcoins either while Bitcoin sits in limbo here.
Still, seasoned investors know to be greedy when others are fearful — as seen by how quickly BTC bounced back above the $30,000 level. So this fear, uncertainty and doubt (FUD) could be a contrarian indicator, as my colleague Marija touched on earlier this week.
We’re optimistic but keeping an eye on those key levels mentioned above. If you’re investing on your own, I suggest you do the same.
If you’re a member of any of our trading services, keep an eye on your inbox for your next updates.
Best,
Alex
