Last month saw the price of BTC/USD (BTC-USD) drop below its long-standing support price of $5,800, on the back of the Bitcoin Cash (BCH-USD) hard fork which produced just the impetus needed for sellers to push prices below this support level. This price move is not unexpected, as it’s part of the downside resolution of the price move below the descending triangle on the weekly chart.
The question that now confronts traders of Bitcoin is this: Have we hit the bottom, or is worse yet to come? This analysis piece attempts to look at the price action of BTC/USD as it attempts to answer these questions.
Fundamentally speaking, the market has provided a bearish ending for a volatile year in Bitcoin. It looks as though it will end the year below $4,000 — after hitting an all time high near $19,000 in early 2018.
2019 is shaping up to be a year for institutional investment. Bakkt, the crypto company spun out of the Intercontinental Exchange, just announced a $182.5 round of investment capital fundraising. This coming from 12 firms, some major names in venture capital.
2019 also will see BTC continue to challenge national regulatory bodies. If and as countries can provide proper regulatory framework, BTC prices may see stability and potentially rise on growing demand and limited supply. For now, here are the technicals going into 2019 for BTC on its USD trading pair.
The BTC/USD weekly chart is shown below, and we can see that after posting some slight gains in the week leading to Christmas, the weekly candle is trending downward. Most cryptos lost ground in the current week, and Bitcoin is leading the way. The long-term outlook indicates that a further test of the $3,200 support level, which was last seen in October 2017 and the third week of December 2018, is very likely indeed.
We also can see that the 9-EMA line (orange-colored) is located above the price action candles, thus serving as a dynamic resistance to price action. This gives further confirmation that price moves for the rest of the year will most likely be to the downside.
BTC/USD Weekly Chart: December 30, 2018
We then switch focus to the daily chart, where we see a number of things:
There are a number of things that should be noted from this chart.
- The brief period of price recovery in the week leading up to Christmas stalled at an area where price had previously found resistance. This was at the $4,560 mark. This area also marks a previous resistance (boxed areas).
- A minor horizontal support exists at the $3,870 mark. This level needs to be broken to the downside for the price to continue moving southward.
BTC/USD Daily chart: December 30, 2018
- The major horizontal support line rests at the $3,212 mark, where price had found support two weeks ago.
- The 9-EMA indicator line has been broken by downtrending price action, and it now sits atop the daily candles, providing dynamic resistance to price action.
So how does all this play out?
The major support continues to remain at $3,212, while the major resistance continues to be the $4,560 level. In the long term, this looks to be the boundaries of the range of price movements of the BTC/USD, with price oscillating between the $3,212 floor and the $4,560 ceiling. Within this price range, there are several minor support/resistance key levels which will serve up areas where traders can set up short-term entries.
The scenarios for BTC/USD will depend on the behavior of price action at the minor and major levels of support and resistance. One scenario favors downside movement of BTC/USD, which will occur if price action breaks the current minor support levels, best visualized on the four-hour chart below.
BTC/USD Four-Hour Chart
If the weekly price candle/bar closes below the $3,700 minor support price level, then price action will make a dash for the next major support levels of $3,212. This move is going to have contentions along the way, as several minor support levels (such as the $3,400) mark will have to be breached.
The outlook for the long term, mid term and short term is as follows:
- Long-Term – bearish
- Mid-term – neutral to bearish
- Short term – neutral to bearish
It’s expected that BTC/USD will head south in the coming weeks in order to test the long-term floor of $3,212.
Please note: It takes a whole week for a candle to form on the weekly charts, so these moves may take several weeks to play out. Entries should be made on shorter time frame charts such as the daily chart.
Well, the crypto craze may have deflated. But that’s not a bad thing! In fact, if you still believe in the transformative power of blockchain, it means that many of these technologies are back to early adopter prices. At the Coin Agora, our focus is on altcoins – the smaller cap cryptos that have massive potential to disrupt business ecosystems. Don’t miss out—let us help you cut through the noise and find winners – join the Coin Agora community today!
Disclosure: I am/we are long BTC-USD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.