Bitcoin: It Is All About Buy Low And Sell High
By Naeem Aslam, Forbes.
The total cryptocurrency market capitalization
is sitting under $300 billion as the digital assets continue to get crushed
leading Bitcoin and Altcoins lower. Bearish red volume is creeping up signalling
a significant increase in selling confirming the strong bear trend present
since December. From a technical standpoint Bitcoin looks weak, breaking
critical support levels sending price headed towards the next major support
around $6,000. Fundamentals are improving with progress stretching from ETF
launches to regulatory progress, with the market still remaining bearish.
From a technical standpoint for Bitcoin, the
price has broken towards the downside out of the symmetrical triangle pattern.
This is a bearish sign and if the price stays below this pattern, the downtrend
would continue. Moreover, on a daily time frame, the price trading below the
200, 100 & 50 day moving averages (shown in pink, orange, green
respectively). This further confirms the bear strength from a technical
perspective. If Bitcoin breaks down further and cannot hold a major support
line around $6,000, we could see prices head violently lower to its next major
support of $5,100 and next major support at $4,900.
It is interesting to note that on
the daily chart the 50 EMA (exponential moving average) seems to be acting as
resistance, with Bitcoin failing to hold above the line in three separate
instances. Once in late February, early March, and again breaking down below
the 50 EMA in May. If we look back to 2017 during the latest bull cycle the 50
EMA acted as a solid support. When prices would retrace to the 50 EMA a bounce
would follow extending Bitcoin to new highs. Many traders agree that until
Bitcoin is able to break above the 50 EMA and stay there, the bear trend is
still valid and prices may continue lower.
To identify a long term trend
relationship traders will also keep a close watch on the 200 SMA in relation to
the 100 SMA. When the 1000 SMA crosses below the 200 SMA a bear trend can be
confirmed. However when the 100 SMA crosses back above the 200 SMA, the
probability for a bullish trend is increased.
Technicals aside, there is a lot of
positive news cryptocurrency investors should be excited about. Coinbase
announced that its index fund is official open for business. The index fund is
likely targeted towards accredited investors due to the investment requirements
of at least $250,000 to upwards of $20 million. The reason this is exciting is
due to the fact that ETF’s makes onboarding for institutional money easier.
Large institutions and Pension funds are not the ones to day trade stocks and
other assets. It can take months if not years for institutions to size into
positions. The same can be said for institutions selling out of positions. They
tend to sell out strategically in order to have little influence on short term
price action. The more ETFs that are available in a regulated and secure
environment, the more attractive a cryptocurrency investment may seem to
institutional investors.
Positive news out of the SEC
resulted in a green day across the board for many crypto assets. Ethereum is up
just about 10% after the ruling that it will not be categorized as a security.
This resolved the massive amount of uncertainty regarding the issue and
restored investor confidence in the second largest cryptocurrency. Having the
SEC willing to work with cryptocurrency is positive for the space thus further
legitimizing the industry.
Even though price action has been
bearish pushing many investors to sell at staggering losses, fundamentals are
increasing as each day passes. Perhaps this could be a second chance for people
to accumulate at low prices in preparation for the next bull cycle that is
expected to be even more powerful than the last. It is still important to watch
key price levels in order to identify buying points to mitigate risk and
achieve a logical risk to reward ratio for mid to long term trading.
Disclaimer: I hold Bitcoin and
other cryptos assets.
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