Last week in Bitcoin Price Analysis we said:
BTC is oversold on the 4H chart, but the daily and weekly charts are looking grim. With the FOMC meeting looming and persistent inflation, macroeconomic headwinds continue to buffet BTC and other risk markets. BTC seems to have found local support around the $18.5k zone, but further consolidation and/or grinding lower is the most likely scenario for the medium term.
BTC did make a lower low at $18.1k on Sep 22nd after the FOMC announced an additional 75bp hike to the United States interest rate. Following that low, BTC bounced back to $19.5k, and has since held our identified support of $18.5k. Currently, BTC is trading at $19.2k and continues to range and consolidate.
So what comes next for BTC? Let’s take a look at the charts and find out.
4H moving averages remain in a bearish configuration, but there is actually some bullish divergence as the price has broken above the 50SMA. This level will act as a key local support now, priced at $19k. BTC faces its next test at the $20k mark, which is a key psychological price zone as well as the 4h 200 SMA. If BTC reclaims $20k, it will have also regained some bullish momentum that could take it higher in the medium term.
4H momentum indicators are trending upward and have not yet reached an overbought zone – raising the likelihood that BTC tests the $20k resistance in the coming days.
BTC faces its next test at the daily 50 and 100 SMA, which are both priced around the $21k mark. If BTC manages to break the $20k 4H resistance, it will likely range between there and $21k as it regains momentum. Long term resistance at the daily 200SMA is priced at $28.6k. Breaking this key level would signal the start of a new bull market.
Last week’s consolidation comes after BTC hits an oversold point on daily momentum indicators. The RSI has been trending bearish for weeks, and Stochastic bottomed out. We can see a rising bottom on the RSI – a bullish divergence. I expect BTC to consolidate and grind upward in the coming days and weeks.
Long term momentum indicators paint an interesting picture. The Stochastic has been nearing an overbought point for the past two months, but RSI has been making higher lows – a clear sign of bullish divergence. We could see a sharp move upward in the coming weeks as the Stochastic has not yet reached its extreme overbought point – but rather continues to consolidate in this range.
BTC has been consolidating beneath the weekly 200SMA for the past month – the first time in its history. If BTC successfully recliams the 200w SMA, priced at $23.5k, it will regain bullish momentum and likely test the $28k resistance zone we identified on the daily chart.
Bitcoin Investor Sentiment
Investor sentiment remains extremely fearful. This indicates that most of the FUD is priced in, and that markets have largely taken account of the global recession that is beginning to be felt around the world.
Bitcoin Fundamental Analysis
Glassnode data shows that BTC holders have not given up or lost conviction. Coin days destroyed – an indicator that measures holders’ capitulation – has reached an all time low. This means coins are more dormant than they have ever been.
It’s worth noting that all previous examples of CDD being this high were after bear market bottoms were formed. This was the case in 2011, 2015, and 2019. Could this be another signal that the market bottom is already in?
Conclusion
Bullish divergence on the 4H and Daily charts are a glimmer of hope for BTC. Investor sentiment remains extremely fearful, and fundamentals remain strong for BTC. It seems likely that BTC will continue grinding upward – with periods of consolidation – for the next few weeks. A break above $20k would likely send BTC up to retest the 200w SMA at $23k, which would be a key level to watch.
Support Zones:
- $19k (local)
- $18.5k (local)
- $17.6k (previous bottom)
Resistance Zones
- $20k (local, psychological)
- $21k
- $23.5k
- $28k
Not investment advice. Do your own research.
