Bitcoin rallied a bit on Tuesday to pierce the $32,000 level. There was a very impulsive candlestick on Monday, but it should be noted that Tuesday was very quiet. This is interesting considering that institutional traders were not involved in the Monday candlestick, so that may have been Bitcoin taking advantage of a lack of liquidity. Either way, we are still in a very bearish market, so a rally will more likely than not struggle to maintain any type of momentum.
The 50-day EMA sits at the $34,000 level and is sloping lower. This suggests to me that we could see dynamic resistance come into the picture rather quickly, offering further bearish pressure. Granted, this has been a good couple of days, and most certainly the $30,000 level will probably offer a bit of psychology when it comes to support. However, I just don’t see this market changing rapidly, because there is no real use for Bitcoin at the moment. Yes, you will hear people on forums talking about “I just bought several things with Bitcoin yesterday”, but that’s nonsense.
Furthermore, given the fact that Bitcoin has not proven itself in any one particular way, it’s difficult to imagine why somebody would go out of their way to risk their trading capital on Bitcoin when even stocks can’t seem to produce some type of sustainable return at this point. Remember, Bitcoin is still a relatively new technology, although distributed ledgers have been around since the Middle Ages.
If we were to break down below the $28,000 level, then that could open up fresh selling, but right now it looks like this is a run-of-the-mill bear market bounce, at least until we break above $40,000. That would be a gain of roughly 25% from here, so we have a long way to go before the buyers firmly take control. The only thing I can think of right now that would shift the tide would be if we suddenly see the Federal Reserve change its entire attitude when it comes to monetary policy. That does not look to be very likely, so I believe we will continue to see a lot of risk aversion, which is like kryptonite for the Bitcoin market. Because of this, I’m looking for signs of exhaustion that I can start shorting.
