We warned readers and viewers about a forthcoming Bitcoin and cryptocurrency dump. Looking at the chart with the eyes of a technical analyst, Bitcoin had a really nice looking rising wedge pattern. A breakdown was expected.
I received a lot of heat from crypto bulls from the previous call, and I will likely receive more heat with this call:
BITCOIN IS HEADING TO $12,000
Month after month I have warned crypto bulls that Bitcoin and cryptocurrency act as RISK ON assets, NOT RISK OFF ASSETS. What this means in simple terms is that Bitcoin will move just like stocks. If stocks are heading lower, so will Bitcoin. If stocks are moving higher, so will Bitcoin.
If you look at the macro picture right now, it appears as if the stock markets shifted to the recession narrative too quickly. The inflation narrative is still in control and markets have recently begun pricing in more interest rate hikes by central banks. The Bank of Canada just raised interest rates by 75 basis points, and the Federal Reserve is expected to do the same on September 21st.
The Bank of Canada has said that more interest rate hikes are coming. Fed vice chair Brainard is hinting at more rate hikes as well.
What does this mean for crypto traders? More rate hikes likely mean lower stock markets and a stronger US Dollar. Both will put pressure on Bitcoin and other cryptos.
I have heard many people say it is all about the fundamentals. Ethereum merge is what keeps popping up.
There could be something to that. Ethereum has performed better than Bitcoin in the past few days. However, from a technical perspective, we have the same rising wedge pattern and major resistance at $1700 is attracting sellers.
The BIG fundamental thing to watch for is the central bank digital currency (CBDC) and whether central banks, institutions which have held the monopoly to issue money for hundreds of years, will give it up when they release the CBDC. Some people claim the way around this is cryptos not being money but a digital asset instead.
On the daily chart, Bitcoin is battling at a MAJOR support level. This $18,950 zone has acted as support in June and July where Bitcoin bounced three times from this zone. Can we make it a fourth?
The importance of this zone is shown more clearly when you zoom out to the weekly timeframe.
The big weekly breakdown came when we confirmed a close below $30,000. The support zone where we currently hold was the target. A pop occurred but those gains have been long gone. I see a lower high on the weekly forming which means Bitcoin will close below this $18,950 zone. This sets up a run down to the next support level… which comes in at $12,000.
So what will I be watching? Bitcoin could turn around at the current support. For a bearish move, we need a WEEKLY candle close below this support to be confirmed by the end of Friday. This triggers and confirms the breakdown, and Bitcoin heads to $12,000.
If Bitcoin remains above, I would watch the daily chart for some sort of reversal pattern to form.
Watch that US Dollar chart, and watch the 10 year yield. The latter impacts the stock market and is looking to move higher which means lower stock markets. This along with a stronger Dollar increases the probabilities of a Bitcoin breakdown and a move down to $12,000.