BTC/USD has powered quite handily above the 50-Day EMA, and now it looks like we are going to see an attempt to break out even further. That being said, I see several problems along the way, not the least of which would be the psychologically significant $25,000 level. After that, the $28,000 level begins a relatively significant resistance barrier that runs all the way to the $32,000 level. In order to break above there, we are going to need a massive shift in the psychology of markets in general.
Keep in mind that Bitcoin is a highly speculative instrument, so people will continue to look at it through that prism. Market participants forget that Bitcoin participates in the broader financial markets, despite the fact that it is supposed to be something “for the people.” Institutions have moved into this space, thereby making it yet another financial asset. Nothing more, nothing less. Ironically, one of the main reasons the market took off the last time was all of the institutional money coming in, which is now completely changed the market. I say this not to deride anyone, just to show how ironic the entire situation has become.
If we do break down from here, the $22,000 level will have to be paid close attention to, because it was the top of the previous consolidation area. Ultimately, this is a market that I think will eventually figure out what it wants to do longer-term, but we may have some time to go before we truly put a complete bottom in. After all, markets have bear market rallies all the time, and that might be what we are seeing here. If we break down below the $18,000 level, we could collapse down to the $12,000 level rather quickly. In that scenario, I just don’t see how Bitcoin can be taken seriously for anything other than a longer-term “accumulate and hold” type of strategy. From a trading standpoint, that would be catastrophic.
On the other hand, if we do break above the $32,000 level, we will be off to the races as the market would almost certainly break above the 200 day EMA in that same scenario. Either way, it’s going to be a very noisy ride and you need to be cautious with your position size as per usual. This is especially true as the markets seem to be looking for the next catalyst.
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