Bitcoin’s Potential Continuation to the Downside
Last week Bitcoin bounced from a key support that was previously resistance. Even though this was a bullish move, more bearish confluence is appearing which could lead Bitcoin to further losses.
As it has been discussed on previous webinars, Bitcoin is presently showing more and more bearish confluence in terms of potential new resistance. Last time, I discussed how bouncing from the $10,000 level could lead Bitcoin to potential gains if it could break the smaller resistance at $11,000. This and last week, Bitcoin saw a rejection of the $11,000 area alongside a bearish cross from the 20 and 50 EMA on the daily. I have discussed the 20 EMA and its relevancy in terms of Bitcoin’s price action. The 20 EMA has been a strong support through the rally and could potentially serve as a strong resistance now that Bitcoin has broken it to the downside.
For the short-medium term, I see Bitcoin potentially retesting $10,000 level as a make or break scenario. If Bitcoin reaches that level two scenarios likely to happen are as follows:
Bullish scenario: Double bottom at $10,000 propelling Bitcoin to $11,000 maybe $12,000.
Bearish scenario: breaking support and following to the next support area around $9,500 and $9,100 initially.
Dollar Currency Index
The dollar currency index has been showing some strength lately. It is important to notice the bullish divergences created on the daily timeframe. In terms of patterns, there is something very similar, although not perfect, to a potential inverse head and shoulders. With all this confluence and the price breaking from the key resistance level at 94, a rally up to at least 95 is not out of the question.
If the DXY continues going up, risk-on assets such as stocks, gold, and crypto are most likely to be negatively affected. This could also go hand to hand with the upcoming elections. It seems that the market is again turning risk-off as of right now.
Gold has been forming a descending triangle for the last couple of weeks. It is important to highlight that even though this triangle technically broke to the upside, the previous high was not broken, meaning that the pattern was still valid. As of today, the price action has broken to the downside in accordance with potential bearish targets for this formation. This also comes as a response to the dollar currency index going up.
More about the author:
Patrick Maldonado is a Cryptocurrency Trader & Market Analyst at Alphachain Capital.