Bitcoin markets initially tried to rally on Monday, but then pulled back rather significantly to go looking towards the $42,000 level. The $42,000 level is an area that has been “fair value” for the recent trading between the $44,000 and $40,000. I think at this point in time we are simply trying to build up some type of base in order to bounce in a market that has been so significantly sold off.
It is also worth noting that the $40,000 level underneath should continue to offer plenty of support due to the fact that it is a large, round, psychologically significant figure, and an area where we have seen consolidation and support in the past. It is worth noting that we ended up forming a hammer during the previous week, which offers a huge amount of support and is a huge technical signal that a lot of technical traders will get involved.
If we were to break down below the $40,000 level, that could open up quite a bit of significant selling pressure, as it would be yet another major round figure that has been destroyed. I do not think that will happen very easily, and I think we pwill probably see more sideways action than anything else in the short term. Longer term, if we can break above the $44,000 level on a daily close, that is the signal that I am looking for to start buying aggressively.
If we do break down to the downside, then I anticipate that a move down to the $30,000 level could possibly be where we go. I do not necessarily expect that to happen, but it is a possibility that I am seeing on the charts. It makes sense that the large, round, psychologically significant figure would attract a lot of attention. I do not believe that it is going to be easy to get down there, and quite frankly I am not looking for that trade, but we always need to have a bit of a “Plan B” in case things fall apart. Keep in mind that the US dollar strengthening has also caused some issues for Bitcoin, but at this point in time we have corrected so much that it is probably only a matter of time before the longer-term holders come in and pick this thing up.
