Flash Alert: Friday 4th October
The knee jerk reaction to the recent sell off that took place at beginning of last week has been met with consistent selling pressure each time Bitcoin approached key moving averages, gradually taming Bitcoin back towards the $8,000 level.
But despite staling sentiment, it is positive to note that strong support did emerge during the early trading hours as Bitcoin neared the $8,000 mark.
At the time of writing today, BTCUSDT was trading at $8,086 following an earlier intra-day high of $8,232.41 and low of $8,005.
Given the support seen during early trading hours we would not be surprised to see BTCUSDT bounce higher throughout the day.
It would be entirely possible for BTCUSDT to retest the $8,200 level if it manages to clear hurdles that reside between $8,150-8,160 and $8,170-$8,180 marks; so keep an eye on these levels on the intra-day charts.
A close above the $8,215 – $8,230 range and the $8,350 hurdle would be seen as a very positive outcome for the bulls as it suggests BTCUSDT may retest $8,500, giving them another chance of taking the reins.
But in the greater scheme of things, nobody has a crystal ball to know precisely where Bitcoin will swing.
We do know the times of the day Bitcoin tends to become choppy, and you would know that too if you have traded Bitcoin for sometime or followed our Twitter feed.
However, we prefer to look at overall trends and momentum, and we believe it remains bearish.
Bitcoin has after all been in a bearish cycle since its peak in Q2 of this year so we are not saying anything new. But that does not mean we cannot see rallies during a bearish cycle either. And therefore, we must be careful to not get carried away and fall into any bull traps along the way.
And timing intra-day price levels and pivot points is very tricky. Whilst we do enjoy the excitement of day trading, experience tells us its much safer to avoid trying to time the market and to never try to catch a falling knife!
The trading style we prefer involves holding positions for a couple of weeks or months as you do not have to worry too much about noise and instead focus on managing risk exposures carefully.
This ensures you are not wiped out by any tail risks (if you have done your analysis properly) but at the same time you need to be disciplined with your thresholds and become comfortable cutting losses.
So trading is very much a game of longevity – at least for us. And we also prefer to combine trading so that you are either trading to hedge or trading to accumulate positions within an investment portfolio.
So now that you understand the trading style we prefer, you may appreciate the context of our Bitcoin updates better.
At this juncture, we remain bearish on Bitcoin because of the overall price trend and momentum simply continues to point downwards.
And the breaching of the 200-day moving average together with resistance at the short-term moving averages on the daily charts simply confirms the downward trend remains in tact.
We believe that if BTCUSDT fails to regain strength above $8,200 by later today, we may see a reversal in the price, with the $8,000 level where it had found support during early trading, at risk of caving in.
This would pave way to the $7,700 – $7.800 range and our target of $7,500, which is an important support level.
Depending on the volumes and price action, we will re-evaluate the situation at $7,500. But if this level is violated then we would expect to see the price of Bitcoin test $6,200 – $6,500 perhaps not immediately although eventually.
If we had to look at the current bearish trend from a miners point of view, we believe there is actually an incentive for those miners that have heavily invested in newer (and faster) mining equipment to intentionally exert pressure on the price of Bitcoin.
Doing so wipes out the slower competing miners that are contributing to the rising difficulty rate of mining new blocks.
This survival of the fittest scenario helps the fastest miners maximise the number of Bitcoins they can acquire before the next halving in May 2020.
This is of course only a hypothesis as we attempt to make sense of the current bearish trend and relate it to the underlying drivers of price.
In the meantime, we hope to have left you with some interesting perspectives to mull over the weekend.
Anyone interested in reading our previous Flash Alerts may do so here as they remain valid and provide a good trail for anyone wanting to catch up with recent price action.
A follow up post to this Flash Alert may be found here.
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