Good Day Midas community!
The markets have been very turbulent in the time since our last article. ICYMI, our conclusion in our last analysis was: Short term pain, long term gain. In other words, we thought that further price retracements below the $11.2k level were quite likely before Bitcoin continues its bull trend.
Our hunch was correct. This is exactly what played out in the markets.
Let’s take a look at what the charts and fundamentals are telling us, and see if we can continue to predict BTC’s movements.
Price Analysis
At the time of writing our last article, Bitcoin was trading around the $11.2 – 11.3k level after testing the $12.4k resistance zone. As we predicted, the markets have experienced a lot more “pain” – further retracing in price to the current $10.2k mark. As we know, the $10k price level serves as extremely strong resistance/support, as it is a key psychological number. Over the past week, Bitcoin has tested the $10k level multiple times, as represented by the several “wicks” that reached as low as $9.8k. Since Bitcoin has consistently bounced back above this level, I view it as a strong confirmation that $10k is a strong support level. The support range is from $9.8k – 10k.
Here we take a closer look at the price movements by looking at the 1H candle chart. The solid green line is the strong $10k support level. We also can see the moving averages in this chart.
While the moving averages aren’t necessarily bullish, the 20MA is now preparing to cross above the 100MA, which is flattening out. This could mean that the worst is over, and Bitcoin will trade sideways for a bit as it refuels to test resistance levels.
To get a Macro view, we will apply the same criteria to the daily chart. We can see that despite the recent pullbacks, the bull trend dating back to March is still in tact. The moving averages are still bullish, but if BTC breaks below $10k, support will be found around $9k, where the 200MA currently sits.
Investor Sentiment
As we know, Bitcoin’s price is largely driven by how the crypto community feels. We typically use the Fear/Greed index from Alternative.me. Let’s take a look:
As you can see, last week the market went from “extreme Greed” to “fear” rather quickly. However, the index read basically flat after the initial drop. Here is a plot of the FGI over time:
The Index changed from 79 to 41 overnight, where it has stayed for most of the past week. However, in my opinion this change does not reflect the true fear of the crypto community.
There is another Fear/Greed index that we will take a look at, and perhaps take an average of the two.
This additional index shows a sentiment of “Extreme Fear” which I think accurately encompasses the feeling of the crypto market over the past week. From this, we can gather that the market is Fearful/Extremely Fearful, which in general is a bullish sign for crypto. Remember, we want to do the opposite of what the markets are doing.
Fundamentals
This suspicion is confirmed by Bitcoin’s hash rate. Despite the dip in price, the network continues to grow and the hash rate is climbing. This means that the inherent value of Bitcoin is still trending upward.
It’s important to keep in mind that Bitcoin miners tend to be good traders. If the hash rate is higher, we can assume that more electricity is being used to mine a single Bitcoin. If the cost to “mine” a Bitcoin is greater than the value of the Bitcoin, the hash rate will go down as miners are turned off. But if the hash rate is climbing while the price is dipping, we can assume that miners are going to hold their newly mined BTC and sell at higher levels. This is bullish.
We can also see that the Bitcoin network continues to grow despite the decline in price. More people are using Bitcoin than ever before, which will be reflected in the value sooner or later.
Analysis
Bitcoin has declined in price over the past week, but has held the $10k support level nicely. This, combined with the fearful market sentiment and strong fundamentals, indicates that the market is quite bullish at this point. I expect Bitcoin to trade sideways for a few more days before moving up toward $11k, and possibly $12k. If Bitcoin reverses and breaks below $10k, I expect to find support at $9k.
TLDR
- Price Analysis: Neutral
- Sentiment: Bullish
- Fundamentals: Bullish
- Consensus: Bullish
Please keep in mind that all information in this article are for educational purposes only, and should not be taken as investment advice. Always do your own research before making any investment decision.
