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 point 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. Typically, times of extreme fear and FUD present great buying opportunities, and usually the FUD is overhyped or made up entirely.
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.
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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