Bitcoin markets initially tried to rally on Wednesday but gave up gains above the 50-day EMA. The Bitcoin market looks as if it is running out of momentum. This is one of those situations where you have to be careful about your technical analysis, because you could make a serious argument for a bullish flag, but at the same time you can make an argument that the 50 day EMA and the 200 day EMA are both working against Bitcoin.
In this type of environment, I do not think that Bitcoin does very well. Any time there is a major “risk off” attitude to the markets, it is hard to imagine something as speculative as crypto taking off for a longer-term move. Keep in mind that Bitcoin is the first place that a lot of institutional money will go to, so whatever is going to happen in the crypto markets, you will see it here first.
The 200 day EMA currently sits at the $45,503 level, and if we can break above there then I think a lot more mechanical traders will get involved in the market and that would also have those of you thinking this is a bullish flag jumping into the market as well. That could open up a move to $50,000 rather quickly. On the other hand, if we continue to see a lot of fear out there, it is difficult to see a lot of money jumping into the crypto markets. After all, you have to keep in mind that a lot of this institutional money will have clients attached to it that do not want to see 30% drawdowns.
To the downside, I believe that the $40,000 level will offer a significant amount of support, based upon psychology. After that, then we could be looking at the $35,000 level which we have tested recently. I do believe that although Bitcoin is not likely to do well in this type of economic environment, the most vicious part of the selling is behind us. With that in mind, this is a market that longer-term investors are trying to build up a position in. Because of this, I think you need to look for dips to take advantage of any type of value.
