Last week in our Bitcoin Price Analysis we said:
With bear flags forming on the 4H and weekly charts, a pending death cross, and the loss of key price levels, things are not looking good for BTC in the short / medium term. A retrace to the psychological $20k level looks likely in the coming days / weeks, as momentum indicators need to reset and consolidate before any bullish momentum can be regained. Fundamentals look shaky, and a global economy on the edge of recession spells future pain for BTC. Good times will come again, but there will be buying opportunities along the way.
Our prediction that BTC would retrace to the $20k level was correct. Last week was a difficult one for BTC, which dipped below $20k over the weekend before reclaiming it Monday morning. At time of writing, BTC is trading around the $20.3k mark.
Let’s take a look at the charts and see what’s next for BTC.
🔬 Bitcoin Price Analysis
Things are looking pretty bleak on the 4H chart. The moving averages completed the death cross pattern, followed by a merciless dump and rejection off the 4H 50 SMA. BTC may have found a local bottom around $19.6k for the short term. Currently, BTC is in the midst of a short squeeze to liquidate late short entries. Resistance will continue near the 50 SMA, currently priced at $20.9k.
Before the last few candles, BTC was looking heavily oversold on both the RSI and Stochastic. However, this short squeeze has sent the RSI back to neutral and the Stochastic is already back to overbought. The bearish divergence here is that we are overbought at a much lower price point, clearing the way for lower lows in the coming weeks.
Daily moving averages have been and remain bearish. Resistance is at the 50 SMA, priced at $22.3k currently. Moving on to daily momentum indicators, the RSI and Stochastic are both near oversold levels, so it is likely that the $19.2-19.6k support zone holds for the time being. A larger short squeeze and rejection off the daily 50SMA is possible and could produce a similar phenomenon to what we see on the 4H chart (overbought at a lower price).
BTC’s weekly chart does not look promising, as Stochastic is overbought and beginning to move down. This typically leads the RSI, which may dip back into oversold territory in the coming weeks. BTC also appears to have rejected off the weekly 200 SMA for the first time in its history. This is a key price level and will act as major resistance at $23.2k.
⚖️ Bitcoin Investor Sentiment
One thing working in BTC’s favor is that investor sentiment is back to “Extreme Fear” – signaling that the market is heavy on shorts and FUD is priced in. Important to note, however, is that there is still more room to fall for the “Extreme Fear” to become even more extreme. Readings below 10 tend to signal pico bottoms. One major points of FUD over the last few weeks was that 140k BTC would be released from Mt. Gox at the end of August – a number that dwarfs the TFL dump in May and would send BTC tumbling further. These claims were dismissed by Mt. Gox creditors – read more here. Typically, times of extreme fear and FUD present great buying opportunities, and usually the FUD is overhyped or made up entirely.
🔎 Bitcoin Fundamental Analysis
Bitcoin’s network has actually been gaining total hash rate despite the market turndown, signaling fundamental strength.
Generally speaking, BTC has been moving inversely with the DXY (the dollar index) which has been on a parabolic bull run over the past several months. The DXY is currently at a major resistance point at 109.3, where it topped in June. If it tops again here and is rejected, it forms a bearish double top pattern, which would probably mean the bottom is also in for BTC. It will be important to watch the DXY in the coming days and weeks.
📜 Conclusion
The recent short squeeze has made BTC overbought on the short term, signaling another impending dump back to support zones. The daily chart, however, looks heavily oversold – so these support levels are likely to hold (at least for the medium term). The weekly chart appears to be losing steam, but with the RSI so close to oversold, it’s unlikely that the $17.6k bottom set in June will break – barring some unforeseen global black swan event.
Support Zones:
- $19.2-$19.6k (local)
- $17.7-18k (previous bottom)
Resistance Zones
- $20.3k (local)
- $22.3k
- $23.3k
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