The Bitcoin market initially tried to rally on Tuesday but gave up gains to form a little bit of an inverted hammer. The inverted hammer suggests that we are perhaps going to attempt to break down below the hammer from the previous session, meaning that we could see a little bit of downward momentum pick up. The $37,500 level is an area I have been talking about for a while, and we may test that area quickly. Breaking down below that level would be negative for the market.
If we do get that breakdown, Bitcoin will likely go looking to reach the $35,000 level. This is an area where we have seen quite a bit of support in the past, and I think it would be interesting to see buyers jumping into it and whether or not they can defend Bitcoin at that point. If we do not have the strength to hold above that level, then I think it is probably going to bring in a new flood of selling when it comes to Bitcoin, and perhaps crypto in general.
On the other side of the trade would be if we can take out the $40,000 level to the upside on a daily close. That would be the very first sign of strength in the market that you would have to pay attention to. After that, we would need to see the market break above the 50-day EMA, which is currently sitting at roughly $41,500. After that, you then have the 200-day EMA coming into the picture as the 43,700 level is currently where that sits. Beyond that, then we have the $45,000 level that has been significant resistance, and could be a difficult barrier to overcome.
When I look at this chart, it is obvious that there are a lot more resistance areas above than there are support levels underneath, so I think that Bitcoin will continue to struggle. Signs of exhaustion after short-term rallies could also be selling opportunities for those who wish to get short. For longer-term traders, you probably have plenty of time to build a position, and therefore I would not be worried about jumping “all in” right away, as these types of consolidations do tend to take quite some time. Furthermore, the US dollar continues to work against its value, therefore, I think it is likely that we will continue to struggle.
