Bitcoin got eviscerated on Monday to break down below the $32,000 level. Breaking through the $35,000 level, it opened up a fresh wave of selling, and now it looks like we are all but certain to test the $30,000 level. The $30,000 level will be psychologically important and a “line in the sand” as to where we could go next. If we cross that line, then it is very likely that Bitcoin will melt down over the longer term and then enter what is known as “crypto winter.”
When you look at the chart, you can see clearly that the markets have shifted in their attitude, and it looks quite negative at this juncture. The fact that we have closed at the very bottom of the candlestick suggests that the follow-through should come because it is rare that we formed a massive candlestick that closes at the very top or bottom of the range and does not see some type of follow-through the next day. This is especially true with risky assets such as Bitcoin, which is currently in the process of getting crushed.
The market will probably see a lot of noisy behavior, but I think at this juncture we are looking at a situation where we are going to sell signs of exhaustion after each rally. The $40,000 level should continue to be important, as it is not only psychologically important, but it is also worth noting that the 50-day EMA is sitting just above there. The area should offer a bit of a “ceiling in the market”, and as a result, I think that any time we get close to that area there will be plenty of sellers.
I have no interest whatsoever in trying to get long of this market anytime soon, at least not until we get a couple of daily candlesticks that are very bullish. Even then, I will be a bit cautious about putting any money to work. Bitcoin looks as if it is finally being exposed again because adoption just is not in the cards. This will be especially true if central banks start to release digital currencies, as the general public will more likely than not fall right in line. This is not to say I think it is a good idea, just that it is the reality.
