Bitcoin’s bounce from Monday’s three-month low of $7,715 is struggling to beat the 200-day moving average resistance, currently at $8,440.
The recovery rally lacks volume support and could be short lived. A rising wedge breakdown seen on the hourly chart favors a drop to levels below $8,000.
A close above Monday’s high of $8,368 is needed to weaken bearish pressures. A bullish close, if confirmed, could yield a break above $9,000.
Bitcoin is better bid on the first day of the fourth quarter, but the relief rally is struggling to gather traction above a key former support-turned-resistance.
The top cryptocurrency is currently changing hands at $8,330 on Bitstamp, representing a 7 percent gain on a 24-hour basis.
Prices hit a high of $8,519 earlier today. At that level, the cryptocurrency was up $804 or 10.4 percent from the 3.5-month low of $7,715 reached in the Asian trading hours on Monday.
A recovery rally was expected, as the cryptocurrency was looking oversold on Monday, having dropped by more than $2,000 last week.
So far, however, a sustained break above the 200-day moving average (MA) resistance at $8,440 has remained elusive.
The 200-day MA is widely considered a barometer of the long-term trend. The cryptocurrency is said to be in a bull market if it is charting higher lows above the key MA, while lower lows below the long-term average is taken as a sign of bear market.
Further, the average line proved a tough nut to crack on Saturday, after which a fresh wave of selling ended up pushing prices to lows near $7,700.
Put simply, the 200-day MA is a crucial resistance, which if breached, may invite buying pressure.
Moreover, a convincing break above the 200-day MA would strengthen the narrative put forward by the likes of popular twitter analyst Crypto Bitlord that BTC may have bottomed out near $7,700.
While Crypto Bitlord is calling a bullish move to $9,000, market analyst Josh Rager is expecting consolidation.
The outlook would turn bullish above $8,800, according to Rager. That said, a convincing break above $8,800 may not happen immediately, as technical studies are still biased bearish and the rally seen in the last 24 hours is lacking substance.
4-hour and hourly charts
Bitcoin witnessed a double bottom breakout on the 4-hour chart in the Asian trading hours, opening doors for a rise to $8,900 (target as per the measured move method).
The breakout, however, lacked volume support. In fact, trading volumes have remained low throughout the price rise from $7,715 to $8,519. A low-volume recovery is often short-lived.
The hourly chart is reporting a rising wedge breakdown – a bearish reversal pattern that indicates the corrective rally has ended and prices could fall back below $8,000 in the next 24 hours.
The case for a rise to $8,900 would strengthen if a move above $8,500 is accompanied by a surge in buying volumes.
Bitcoin is currently struggling to beat the 200-day MA resistance.
The cryptocurrency created a bullish outside bar candle yesterday, signaling seller exhaustion.
A short-term bullish reversal would be confirmed if prices print a UTC close above $8,368 today, validating Monday’s outside bar candle. That could yield a sustained move to $9,000.
However, the outlook as per the longer duration technical charts will remain bearish as long as prices are held below $9,097, as discussed yesterday.
Bitcoin bears have continued to flex their muscles into Monday morning. After closing the week at a massive loss, with BTC posting its seemingly worst performance since November 2018’s capitulation event in the midst of Crypto Winter, bulls failed to make an appearance.
As of the time of writing this, the Bitcoin price has started to collapse yet again, falling as low as $7,700 after trending above $8,000 for days on end. This latest collapse, analysts say, are putting the cryptocurrency market in a precarious position — a position that perhaps may precede yet another precipitous plunge.
Where Will Bitcoin Fall To?
This may leave you wondering, where will Bitcoin fall to?
According to prominent analyst Josh Rager, $6,300 at worst. The cryptocurrency investor argued in a recent tweet that the lowest “BTC will hit [is] between $6300 to $6600, [as that is] where there is major interest.”
Indeed, the mid-$6,000s have been of much historical relevance to Bitcoin. That region is where the cryptocurrency famously trended for multiple months in mid-2018 and is also where there exists a high level of historical volumes.
But does Bitcoin even have the potential to bounce?
According to a number of technical indicators, 100%.
Crypto Hamster recently laid out a number of reasonings why this may be. These include the fact that the Daily Fisher Transform, which indicates when the price of an asset has moved to an extreme, has hit its lowest value since 2018’s capitulation event; BitMEX funding is heading deeper negative, meaning that a bounce should arrive eventually; and a number of technical oscillators are as oversold as they were during late-2018.
Also, the fundamentals of Bitcoin have only grown over recent months. You can find more information about those in this Ethereum World News report, which covers a small portion of Adaptive Capital CIO Murad Mahmudov’s “50 Positive Catalysts for Bitcoin”.
What Happens Sub-$6,000?
It is important to note that should $6,000 be lost, it would mark a massive blow to the long-term structure of Bitcoin’s charts.
Due to the extreme importance of $6,000, that support turning into resistance would likely deal a catastrophic blow to the confidence of investors and may lead to a massive decrease in Bitcoin’s hash rate, as miners become widely unprofitable once again.
Subsequent to the recovery of the Bitcoin price (BTC) movement from $7,700 to around $8,200 in the past 24 hours, technical analysts anticipate Bitcoin and other major crypto assets to recover in the short term.
Speaking to Cointelegraph, crypto trader Nick Cote said that there are plenty of times when the price history was at $7,600, which is likely to hold as a level of strong support for traders in the upcoming days. Technical analysts remain divided on the Bitcoin price trend and the rest of the crypto market, but most generally agree that there is strong demand to buy BTC in the mid-$6,000 to $7,000 region.
Bitcoin price sees short-term relief
On Sept. 28, the Bitcoin price critically recovered beyond $8,200 across major crypto trading platforms — including BitMEX and Coinbase — preventing a further drop to the low $7,000 region.
As said by Josh Rager, a crypto technical analyst, the breakdown of key support levels at mid-$7,000 is likely to result in BTC spiraling down to the $6,100 to $6,500 range, which has seen lots of price actions in the months prior. Rager said:
“IMO, the best and wisest move is to continue to scale in at major support areas While many are now targeting $6,100 to $6,500 as the ‘bottom’ — I can certainly see this level be front-run like every other major target this year. Another potential opportunity to get <$8k $BTC.”
The Bitcoin price recovery to reclaim $8,000 as support was important to avoid a steep pullback down to the low $7,000 region and potentially the mid-$6,000 area.
Caption: Bitcoin’s price has recovered slightly from $7,700 to $8,200 in 24 hours.
According to Rager, the sell-off of Bitcoin in recent weeks was triggered by holders of newly acquired BTC, indicating that investors with a long-term thesis, known as “hodlers,” did not capitulate as a cascade of long contract liquidations on BitMEX, which intensified the downward movement.
When Bitcoin’s price initially fell below $9,000, crypto data aggregator Datamish showed that more than $650 million worth of long contracts on BitMEX were liquidated. In the days that followed — especially as BTC dropped below $8,000 — upward of $100 million worth of long contracts were liquidated, bringing the total to about $750 million.
Any positives to take from the price action?
According to Cote, Bitcoin’s price could tag the $7,600 level and initiate an upside movement afterward. Considering that $7,700 has also historically been a level of strong price action and support, as traders such as Scott Melker at Texas West emphasized, it is possible that the $7,700 level is acting as a short-term bottom for BTC, at least for awhile. Cote went on to add:
“I think the price will tag the $7,600 level. Plenty of price history there, serving both as resistance and support prior. I’d expect a bullish reaction at that level back up to the break down point of where we are consolidating currently.”
In the medium to long term, most traders and technical analysts — despite the bearish short-term price movement — remain optimistic due to strong fundamentals. In mid-2020, BTC is expected to go through a mechanism called a block reward halving that would cut the rate in which new BTC is created by miners by half, reducing the circulating supply of BTC across exchanges and over-the-counter (OTC) desks. Cote said:
“I see price beginning to rally hard to new highs post having, but I expect this shake out to complete, followed by a grind back up to the previous consolidation levels that we broke down from earlier this week. My focus remains on the having next year, more so then this quarter.”
While the block reward halving may be priced into the market — as it occurs every four years until the fixed supply of BTC at 21 million is met — reports from investment firms like Grayscale indicate that the halving is still not known by the broader market of investors. This year, a Litecoin (LTC) halving took place, which some believe acted as a rehearsal for BTC.
Most investors Grayscale interviewed, which oversees nearly $2 billion in assets under management, said that they were not aware of the halving, suggesting that it could still have a major impact on the medium to long term price trend of BTC. A report from Grayscale reads:
“The halving is close enough that it’s time to start talking about it more seriously, but far enough out in the future that it’s unclear whether it’s priced into the market efficiently. In fact, based on anecdotal conversations with market participants, we were surprised to learn that many of them were not even aware of this event.”
Another positive factor for a potential relief rally for Bitcoin heading into October could be the recovery of the hash rate of the Bitcoin blockchain network. On Sept. 23, the hash rate of the Bitcoin blockchain network abruptly dropped to 23 exahash from 98 exahash, causing concerns about the stability of the mining industry.
Caption: The Bitcoin hash rate fully recovered after a 30% dip. Source: blockchain.com
Hash rate is considered to be an important fundamental factor of the long-term growth and stability of a blockchain network, as it demonstrates the amount of computing power that secures it. Samson Mow, the chief strategy officer of blockchain company Blockstream, said that it is difficult to say if the hash rate of Bitcoin actually dropped by 30%, given its swift recovery after the drop.
Mow noted that when it comes to measuring the hash rate, only changes in an extended time frame can be considered meaningful. “Only prolonged hashrate changes over statistically significant time periods — maybe two weeks — have meaning,” he said.
Jameson Lopp, the chief technology officer at a crypto key security firm CasaHODL, also said that the hash rate appears to not have actually dropped 30%, supporting Mow’s explanation. “It appears not, it was just regular random fluctuations in block times. The longer time period over which you estimate hash rate, the more accurate your estimate is likely to be… and vice versa,” he added.
With the drop in the hash rate being explained as a minor blip and not at any capacity a major factor to change the course of the trend of BTC, a relief rally for the dominant cryptocurrency is a strong possibility in the near term.
Most likely scenario and the worst-case scenario
Bitcoin’s price dropped violently below the $9,000 after a support level of $9,650 was weakened, as it was tested more than six times over the past few months, creating a weaker base for BTC to turn around and reverse the downtrend.
The most likely scenario for BTC — based on key technical indicators like the 200-day moving average convergence divergence and the Relative Strength Index on larger time frames — is that BTC will see a relief rally as a result of extreme conditions and will eventually test lower-level supports in the coming weeks. Crypto trader Scott Melker opined on Twitter, “There aren’t many clear levels on the monthly chart, but price bottomed out (thus far) exactly on one of them — $7,777.”
Strong lower-level supports are found between $6,100 and $7,700, and as Melker said, $7,700 was the first major support to be tested in months. A cryptocurrency trader known as DonAlt said:
“A range of 100 days just broke to the downside. If this is a bullish shakeout it’ll be obvious once BTC reclaims $10k. If this is bearish I don’t want to be long. Buying this feels like buying $5500 after the $6000 break. Something I’m not willing to do.”
In consideration of the weakened momentum of BTC, technical analysts generally anticipate a scenario in which BTC sees a relief rally to the $9,000 resistance level, which used to act as a strong support, and falling to test lower-level supports by October as the most likely.
Whatever happened to Bakkt?
Throughout 2019, traders and investors highly anticipated the launch of Bakkt, a Bitcoin futures market operated by ICE, the parent company of the New York Stock Exchange, and its potential effect on the price trend of BTC.
However, upon its launch, Bakkt saw minimal volume from investors — certainly not proportionate to the hype it has carried since early 2019. Su Zhu, the CEO of Three Arrows Capital, said that it would take time for brokers and investors to set up systems to process trades through Bakkt and that he expects the volume of Bakkt to increase in the months to come. He added in a conversation with Cointelegraph:
“Bakkt will be likely first a trickle and then a flood. The reality is that most regulated futures contracts get low adoption on day1 simply b/c not all futures brokers are ready to clear it, many ppl want to wait and see, the tickers are not even populated on risk systems, etc.”
Like the CME futures market eventually evolved into a large component in the global Bitcoin market as it established itself as a regulated platform for accredited and institutional investors, Bakkt is expected to see an increase in volume down the line.
Whether an increase in the concentration of the global Bitcoin volume to futures markets would be beneficial to the long-term price trend of BTC remains to be seen. So far, BTC has shown dependence on the CME Bitcoin futures market when it comes to short-term price movements, with expirations of futures contracts often coinciding with a relief rally for BTC.
Bitcoin (BTC) correction may still not be over as bulls have failed to gain control. The price has been on a brutal decline for the past few days but there are still no signs of a recovery as we have seen a strong rejection at the 200 EMA on retest. The daily chart for BTC/USD shows that the price has broken a smaller descending triangle but now it is on the verge of breaking a larger descending triangle. That being said, I don’t expect it to happen when everyone is expecting it. Yesterday’s close below the 200 day EMA was quite bearish but we have yet to see the price begin another downtrend. So far it has been trading sideways and the longer it does that, the higher the probability that we might eventually see a breakout towards the low $9,000s.
There is a very high probability that the price might end up testing the previously broken support turned resistance of the descending triangle. This would be the ideal scenario and it would also make the BTC/USD daily chart a lot more symmetrical. We have seen how rise and fall in BTC/USD have been mirror images of each other in the past few weeks. It might be time that we see that happen on a larger time frame now. If we see a move towards $9,323 from here that would support our long term view of the market and we would see the beginning of the next downtrend from there. At this point, a lot of traders have very diverse opinions as to what could happen next. Some expect the price to fall below $3,000 while others that believe that the price has already bottomed think we might begin a recovery from $6,000 towards a new all-time high.
I have long been expecting the price to decline below $3,000 to complete its correction. I have been looking at the $1,200-$1,800 range as the potential bottom but I’m open to the price finding a bottom between $1,800 and $3,000 under a less bearish case. It is still premature to comment on what will happen when the price does decline below $3,000 but recent moves in the market should convince you that you shouldn’t be surprised even if Bitcoin (BTC) falls down to $1,000 or even lower.
The daily chart for BTCUSDShorts shows a bear flag in the making. The number of margined shorts has been rising as the price of Bitcoin (BTC) rallied. After September 24 when the price of Bitcoin (BTC) started to decline, we saw BTCUSDShorts decline as well as traders took profits. If we are to see some short term bullishness in the market like I expect then BTCUSDShorts might rise again but we need to stay focused on the bear flag here because this tells us that a major crash in the price of Bitcoin (BTC) could be around the corner which would coincide with traders closing shorts or their take profit levels being hit.
The drop in hashrate had nothing to do with the falling price of BTC, and was probably due to a facility going offline temporarily.
The Bitcoin (BTC) hashrate recovered after a one-day crash of nearly 30%, assuaging fears that the network is in trouble. BTC mining now happens at 94 EH/s, near the absolute peak just above 100 EH/s.
The drop in mining was considered a warning about the risks of pure proof-of-work. But even with the lower hashrate, it would be too expensive to attack the network. BTC still uses up as much electricity as Austria, due to the exponential growth of mining in the past six months.
BTC prices stabilized around $8,438.41. At this price level, mining with Antminer S17 is still profitable, though dramatically less so in comparison to June’s conditions. More competitive mining and a steady increase in difficulty lowered the potential reward even for the powerful model, and profitability is now hypothetically around $1,300 per year.
During the recent bout of mining growth, there were signs of Bitmain’s growing influence. The company opened large-scale mining farms, while its pools remained highly influential. Bitmain’s co-founder also returned to the public space. Jihan Wu is now working on Mars Finance, a Chinese cryptocurrency data outlet.
The general impression is that China is at the helm of mining, but other countries also host multiple ASIC farms. Data show that Georgia, due to its mountainous ranges and cooler climate, hosts up to 15% of Bitcoin’s hashing power.
Georgia is also a crypto-friendly country with a high interest in digital coins, as a source of solid currency in a struggling economy. Mongolia and Iran also rise up the ranks, though the governments of both countries have moved in to regulate mining. Mongolia has seen the closing of facilities, while Iran’s government ushered in a registration regime.
The Bitcoin network lost around 600 nodes in the past six months, from above 10,000 nodes to around 9,400. The network is busier these days, with above 848,000 transactions, including UTXO returns.
Ethereum (ETH) all set to decline below $200 as early as this week. The 4H chart for ETH/USD shows that there is now a set of two descending triangles on the chart that the price could break below. It has already broken below a larger rising wedge and is now ready to decline further within the descending channel. RSI has already declined below a key support and the Stochastic RSI is in a downtrend having now run into a trend line resistance. Volume has continued to decline over the past few days and we are now on the verge of a big move. The next support could be the 38.2% fib retracement level but the last time ETH/USD declined in this manner within the descending channel it broke straight below that support.
Bitcoin (BTC) has been trading sideways ahead of the Bakkt launch on Monday but Ethereum (ETH) made some big moves to the upside. Those moves have now been reversed for the most part and we are likely to see further downside as ETH/USD continues to decline within the descending channel. If the price breaks below the 38.2% fib retracement level, we could see it find support on the 61.8%. It might lead to the price testing the top of the descending channel once again but the downtrend is inevitable. Some traders like to think that the price has a 50-50 chance of breaking to the upside or to the downside but I don’t agree with that approach. The odds are never the same. In this case, the probability of a sharp decline far outweighs the odds of a rally to the upside. Even if the price does rally on Bakkt news it would be another unsustainable move that will only delay the inevitable.
Ethereum (ETH) rallied against Bitcoin (BTC) for the past few weeks and has now run into a key resistance at the 38.2% fib retracement level. It has faced a strong rejection there and the Stochastic RSI indicates that the pair is now on the verge of a sharp decline. There are two ways in which this could happen. Either Ethereum (ETH) continues to lose against Bitcoin (BTC) as BTC/USD rises on Bakkt launch or the market falls and both lose ground but Bitcoin (BTC) holds its ground better compared to Ethereum (ETH). In my opinion, the probability of the latter happening is much higher.
The 21 day EMA has come quite close to the 50 day EMA on the daily chart for ETH/BTC but now that it has faced a strong rejection, we are not likely to see what would otherwise have been a very bullish crossover. Ethereum (ETH) has started the day in red against Bitcoin (BTC) for the first time in a week. Investors generally tend to buy the rumor and sell the news but this time a lot of people are expecting something different which is why investors have been very eager to buy the dips. Regardless of what happens short term, Ethereum (ETH) has to begin its downtrend sooner or later.
The price of Bitcoin (BTC) remains largely uninspired and is once again trading sideways around the $10,200 price mark.
Market visualization. Source: Coin360
Although BTC is back at trading sideways, Fundstrat Global Advisors co-founder Tom Lee expects this to change with the coming launch of Bakkt and is positive on its ability “to improve trust with institutions to crypto.”
The world’s largest cryptocurrency continues to trade flat, with an intraday high of around $10,280, while slowly trading downward to its current trading price of $10,147, showing a loss of 1.16% on the day, according to data from Coin360.
Bitcoin 24-hour price chart. Source: Coin360
Price analyst Rakesh Upadhyay wrote today that a breakout of the downtrend line of the symmetrical triangle will indicate that the bulls have overpowered the bears and a new trending move will begin. He expects the momentum to carry the price to the yearly high of $13,973. While the rally might face resistance at $12,304.37 and $13,156.96, he expects these levels to be crossed.
While Bitcoin fails to impress, Ether (ETH) is holding on to its recent gains well above the $200 price mark. The most popular altcoin is currently trading at $217.97, while showing a loss of 0.63% on the day.
Ether 24-hour price chart. Source: Coin360
Ripple’s XRP token dropped below the critical $0.30 price point yet again, from an intraday high of $0.3127. At press time, the world’s third-most popular coin is down 1.43% in the last 24 hours.
XRP 7-day price chart. Source: Coin360
Top-20 altcoins mostly in the red
Most major altcoins are experiencing a red candlestick day, but EOS is up 1.34% in the last 24 hours and IOTA is showing an impressive gain of more than 6.5% on the day. Cardano (ADA) and Ethereum Classic (ETC) are also both up, 2.44% and 0.11%, respectively.
The biggest top 20 losers of the day are Stellar (XLM) with a massive correction of 7.9%, and Tezos (XTZ) down over 5% on the day.
The overall cryptocurrency market cap sits near $270 billion, with Bitcoin making up 67.7% of the total.
BTC quickly fell to $9,600 this morning, bolstering the bearish setup on the 4-hour and daily charts. A deeper drop to key support at $9,454 may now be in the offing.
A UTC close below $9,450 would confirm a downside break of a three-month-long contracting triangle and expose the 200-day moving average (MA) support lined up near $8,100.
A move above $10,458 is needed to negate the immediate bearish case. A UTC close above $10,958 would confirm a bullish triangle breakout.
The 50- and 100-day moving averages are about to produce a bearish crossover, a lagging indicator known to trap sellers on the wrong side of the market.
Bitcoin (BTC) slipped to an 18-day low today, as a key indicator threatens to turn bearish for the first time in a year.
The top cryptocurrency fell by $500 in 10 minutes just after 03:00 UTC to hit a low of $9,600 on Bitstamp. That level was last seen on Sept. 1.
The drop was expected as BTC was on slippery ground following last week’s failed breakout. Volatility also fell to multi-month lows on Wednesday, indicating scope for an explosive price move.
Prices have bounced back a little in the last few hours, but the bearish mood is still intact with the cryptocurrency currently changing hands around $9,850, representing a 3 percent loss on a 24-hour basis.
The spread between the 50- and 100-day moving averages (MAs) of bitcoin’s price has narrowed sharply and the two averages will likely soon produce a bearish crossover, as seen in the chart below.
A bearish crossover occurs when a short-term MA drops below a long-term MA. At time of writing, the 50- and 100-day averages are located at $10,504 and $10,492 and the former looks set to cross below the latter in the next couple of days.
If confirmed, the event would mark the first bear cross of the 50- and 100-day MAs since Sept. 16, 2018.
Technical analysis theory considers the bearish cross of long-term MAs as an advance warning of an impending price crash. They are, however, based on historical data and tend to lag price. Hence, bearish crossovers have limited predictive powers at best and often end up trapping sellers on the wrong side of the market.
For instance, the 50-day MA fell below the 100-day MA on Aug. 29, 2016, when BTC was trading near $570. The cryptocurrency remained flatlined in the next couple of days before rising above $600 on Sept. 4.
More importantly, the $570 price seen on Aug. 29 was never put to test throughout the meteoric rise to a record high of $20,000 reached in December 2017.
Observers may argue that last September’s bearish crossover was followed by a sharp sell-off to levels below $5,000 in November. However, back then, the cryptocurrency was in a bear market. Also, prices remained sidelined above $6,000 for at least six weeks following the confirmation of the bear cross before dropping in November.
Currently, BTC appears to be in a bull market, having charted higher lows and higher highs in the second quarter. Hence, the latest bearish cross may not be a cause for worry for the bulls – especially considering BTC is still stuck in a three-month-long narrowing of its price range.
Daily and 4-hour charts
The upper edge of the contracting triangle is currently located at $10,857 while the lower edge is seen at $9,450.
A high-volume UTC close above $10,857 would confirm the breakout and imply a resumption of the rally from lows near $4,000 in April and could yield a break above the 2019 high of $13,880. That said, a more reliable indicator of bullish revival would be a weekly close above $12,000.
A triangle breakdown, if confirmed, would suggest a bearish reversal and could fuel a price drop to the 200-day moving average (MA), currently located $8,139.
The 14-day relative strength index (RSI) is currently reporting bearish conditions with a below-50 reading. Further, the weekly moving average convergence divergence (MACD) histogram is hovering in bearish territory below zero.
Meanwhile, the 4-hour chart shows a failed breakout followed by a bearish lower high and a drop below key support of $9,855 earlier today.
So, the stage looks set for the test of $9,450 – the lower edge of the contracting triangle. The immediate bearish case would weaken if prices rise above $10,458 (Sept. 13 high).
Bitcoin (BTC)’s next move is going to shape the direction of the market. Many of you might be wondering, “isn’t that obvious?” Well, it’s not. For the past few days, Ethereum (ETH) not Bitcoin (BTC) has been dictating the direction of the market because it has been winning the dominance battle. Ethereum (ETH) has won a couple of battles but can it win the war? I don’t see it happening. If BTC/USD holds its ground while altcoins begin their correction, we might see a trend reversal in Bitcoin dominance which would pave the way for more downside in the market in the days and weeks ahead. So far, BTC/USD is confused whether to break below the descending triangle or break above. Much of this confusion is because of the lack of incentive to trade BTC/USD at the moment because of funding.
If you are a bull, your goal is to pay as less a premium as possible on your longs. If you are longing BTC/USD you are paying a premium of more than 0.03% compared to 0.01% on Bitmex. This makes Ethereum (ETH) more appealing for the whales to long and it makes Bitcoin (BTC) more appealing to short. However, if you are a bear, you would be more interested to short Ethereum (ETH) instead of Bitcoin (BTC) at this point, so this is why Bitcoin (BTC) is currently in a standstill looking for direction. The recent pumps in Ethereum (ETH) while BTC/USD has been trading sideways is a testament to the fact that there is a lack of real buying interest and it’s just the whales stop hunting and shaking out aggressive bears. The Fear and Greed Index shows that there is still a lot of fear in the market. Crypto Twitter also shows that most traders were caught off-guard by the recent move. Even most of the bulls did not expect Ethereum (ETH) to rally beyond $200.
Regardless of whether the recent move in Ethereum (ETH) was manipulation or not, it forced Bitcoin Dominance (BTC.D) to decline to a key support. Bitcoin (BTC) has to hold this support at all costs. If this level breaks, we would have another altcoin season and Bitcoin (BTC) will continue to lose ground against Ethereum (ETH) and other altcoins. In my opinion, something like that would only happen if we were on the verge of a bull market.
As I believe that we are still in the 2014 part of the last cycle, I don’t see this support breaking. RSI on the daily chart for Bitcoin Dominance (BTC.D) has also declined to a strong support that extends to April, 2018. The most probable scenario from this point forward is a temporary rise in Bitcoin (BTC) as investors take profit on altcoins. After that they would need to cash out in anticipation of the next downtrend which is when we will a sharp decline in the market marking the beginning of the next downtrend.
With the hash rate or miner’s confidence hitting record highs, bitcoin’s three-day narrowing price range looks set to end with a bullish breakout.
A range breakout would open the doors to $10,956 – the bearish lower high created on Aug. 20.
A break below Friday’s low of $10,154 would confirm a range breakdown and could yield a sell-off to $9,855 (Sept. 11 low).
Bitcoin’s latest bout of consolidation may end up with bullish breakout, as a key metric of miner confidence has hit all-time highs.
The top cryptocurrency by market value has clocked lower daily highs and higher daily lows over the last three days and is currently trading at $10,300 on Bitstamp, little changed on a 24-hour basis.
The cryptocurrency has charted the narrowing price range amid a surge in non-price metrics including a rise in the network’s hash rate – a measure of the computing power dedicated to mining bitcoin.
Notably, the two-week average hash rate reached a record high of 85 exahashes per second (EH/s) around 19:00 UTC on Friday. Further, mining difficulty – a measure of how hard it is to create a block of transactions – also jumped to a new all-time high of nearly 12 trillion.
Hash rate can be considered a barometer of miners’ confidence in the bitcoin price rally. After all, they are more likely to dedicate more resources to the computer intensive process that secures the network and processes transactions if they are bullish on price. Miners would likely scale back operations if a price slide is expected.
Hence, many observers, including the likes of Changpeng Zhao, CEO of Binance, and former Wall Street trader and journalist Max Keiser believe prices follow hash rate.
Zhao tweeted on Friday that, a rising hash rate means “more miners are investing in BTC,” while few other observers stated that sellers should think twice before betting against the most secure blockchain (the higher the hash rate of a cryptocurrency network, the more expensive it is to attack).
It is worth noting, though, that the market is divided on the relationship between price and hash rate.
Some observers believe the hash rate follows price and the metric’s stellar performance represents overtly exuberant miners.
That said, the price is likely to follow the hash rate this time, as over-exuberance is typically observed at market tops or near record highs. As of now, BTC is down almost $10,000 from the record high of $20,000 reached in December 2017.
Further, with the next reward halving (supply cut) due in less than a year, market sentiment is quite bullish. The sustained uptick in miners’ confidence is more likely to draw fresh bids, possibly leading to a positive feedback loop.
Daily and 4-hour charts
Bitcoin has charted (above left) back-to-back inside bar candlestick pattern on the daily chart over the last three days. The first inside bar appeared on Friday as that day’s high and low fell within Thursday’s trading range. The second and the third inside bar candle was created on Saturday and Sunday, respectively.
Inside bars indicate consolidation and lack of volatility, often ending with an explosive move on either side. A break below the first inside bar’s (Friday) low of $10,154 would imply range breakdown and could yield a stronger sell-off to levels below $9,855 (Sept. 11 low).
A break above Friday’s high of $10,458 would imply range breakout and open the doors to $10,956 (July 20 high).
The falling wedge breakout confirmed on the 4-hour chart (above right) last week is still valid. So, the probability of range breakout is high.