Bitcoin markets did very little again on Tuesday, as we sit just below the potentially crucial $40,000 level. This is an area that I think will continue to attract a lot of attention, so I think a little bit of sideways action will probably continue to be what happens next. Furthermore, we have the FOMC meeting during the session on Wednesday that will have a massive influence on the US dollar, which by extension will have an influence on Bitcoin.
The 50-day EMA is currently at the $41,872 level and dropping, suggesting that perhaps we are going to see further resistance come into the picture. If that is going to be the case, I think at any point in time that we rally, you have to look at it with a certain amount of suspicion. Beyond that, you can also make an argument that we have been in consolidation for a while, so it does make a certain amount of sense that we would see more back-and-forth trading than anything else.
The only thing that I see changing the attitude of Bitcoin in any meaningful way is going to be if the Federal Reserve suddenly changes its tune. If they sound extraordinarily dovish, then I might give Bitcoin a real shot at recovery. However, if they do not, this means that monetary tightening will continue to take money out of risk assets such as Bitcoin.
You can make an argument for a significant amount of support just below, and I would certainly agree with that. However, that does not necessarily mean that we need to go higher. It simply means that is going to take effort to go lower. This is a market that is desperately looking for some type of catalyst to get moving in one direction or the other, and right now it just does not have it. You could make an argument for that support to also be in a bit of a “double bottom” so far, but time will tell whether or not that is actually the case.
Breaking above the $45,000 level could get me bullish of this market again, because not only would you be breaking above the current consolidation region, but you would also be breaking above the 200-day EMA. Until then, I think it is going to continue to churn.
