Bullish view
- Buy the BTC/USD and set a take-profit at 50,000.
- Add a stop-loss at 45,000.
- Timeline: 2 days.
Bearish view
- Sell the BTC/USD and set a take-profit at 42,800.
- Add a stop-loss at 50,000.
The BTC/USD price tumbled in the overnight session as investors reacted to the happenings in El Salvador, the first country to make Bitcoin its legal tender. Bitcoin fell by as much as 17% to a monthly low of $42,852, undoing most of the gains made in the past few weeks. It then bounced back a little to the current level of $47,306.
Buy the Rumor, Sell the News
Buying the rumor and selling the news is a popular concept in finance. It typically sees investors buy an asset ahead of a key event and then exit after it happens. A good example is what happened towards Coinbase’s direct listing in New York. At the time, the price of most cryptocurrencies surged to an all-time high and then resumed a major sell-off.
The same situation happened on Tuesday when El Salvador became the first country to make Bitcoin its legal tender. The put its money where its mouth was, the government announced that it had bought Bitcoin worth more than $20 million. This is a sizable amount for one of the poorest countries in the region.
After initially rising to a multi-month high of more than $52,000, Bitcoin suddenly turned around and declined by as much as 17%. This drop dragged other altcoins like Ethereum, XRP, and Cardano. As a result, the total market value of all cryptocurrencies tracked by CoinMarketCap dropped to more than $2.1 billion.
The BTC/USD also tumbled because of the relatively stronger US dollar. The dollar index bounced back as investors worried about the recovery of the world economy. For example, the pace of America’s hiring has slowed dramatically while the UK home price trend has also slowed down. Therefore, the US dollar rose while other assets like stocks have tumbled.
BTC/USD Technical Analysis
The BTC/USD declined sharply on Tuesday as investors sold the El Salvador news. On the four-hour chart, this price was along the third support of the standard pivot point. The current price is slightly below the first support. It has also moved slightly below the 25-day moving average. It is also an important level since it was the lowest level on 1st September.
Therefore, there is a likelihood that the coin will maintain the bullish trend as investors buy the dip. Besides, the coin is currently at a 10% discount from the highest point on Monday.
