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BITCOIN BRIEFLY FALLS BELOW 42K CAUSING PANIC
It has been an extremely turbulent week for nearly all cryptocurrencies, but Bitcoin (BTC/USDT) also lost quite a lot of value in relation to altcoins and its current dominance sits at 38.5% (with Ethereum dominance at 20.6%). The King of Crypto’s market capitalization has additionally fallen below $1 trillion (by $58B), which is the lowest reading for two months.
Last Monday, the ETH/BTC ratio hit 0.873 and that was the highest value we have seen since February 2018 when, as you probably know, the cryptomarket was on its way to the downside from ATH prices and getting ready for a very long period of stagnation or, as some would prefer to put it, accumulation. Or even more simply – a crypto winter that would last for more than two years before BTC’s next cycle.
The present situation doesn’t necessarily mean that we should be panicking and selling out of all our assets, but unfortunately, the worst-case scenario for Bitcoin has become significantly more probable than it was even last week. Still, no panic please, no hasty decisions, as we are here for you to try and help to make an educated and rational decision about your investments in this, admittedly, true rollercoaster of a market. Let’s look for our ‘’chill pill’’ in the charts then, shall we?
To start with, we need to notice that the current price of $50.5k is still above the 200-day Moving Average, which clearly tells us that BTC remains on an Uptrend in the long-term. The asset’s value did, albeit only momentarily, dip below that all-important MA on the 4th of December reaching as low as the $42k mark, but the instant 22% decline triggered a host of buy orders that had been set up by smart investors who were hoping to purchase some BTC at the truly Black Friday-like discounts. There is a valuable lesson to be learned from this flash-crash, to be specific, that a patient investor can take advantage of such immediate sell-offs. Of course, provided that they have prepared in advance.
Moving on, one day before the aforementioned crash, Bitcoin lost support of the 100-day Moving Average, so the coin is, as of today, on a mid- and short-term Downtrend and currently fighting hard to stay on top of the psychological $50k mark. The week ahead might easily turn out to be the most decisive one in terms of answering the main question that’s on our minds, namely, whether we are still in the bull market or it’s time to prepare for the worst.
Last Monday, the Fear & Greed Index hit the lowest value since July (16/100 indicating Extreme Fear), which tells us that a lot of people must have made some snap decisions. Hopefully, none of our Readers sold at $42k and if you happened to buy really low during the flash-crash – congratulations – that's how easily money can be made from time to time!
So, while BTC remains long-term bullish (at least until its price goes below the 200-day MA, which presently sits somewhere around $46k), it has got some serious challenges to face in the coming weeks. First of all, the resistance at $53k, then the 100-day MA (in our opinion the toughest test of them all) just around the $54.5k mark. Then another potentially tough area of resistance at $56k and the final one before virtually all traders (and their bots) can flip bullish again – the magical $60k.
Closing above $59k would mean that BTC has made a higher high at last, and that would be the first higher high since the 8th of November. The new momentum would surely be enough for BTC to get above the short-term 50-day MA, which would give us all some degree of hope that the largest crypto could still see the six-digit valuations before the end of this cycle.
For the moment, BTC is trading inside of a nasty looking, fairly steep, descending channel, so let’s see in the coming days how the coins’ price action deals with that. Next Bitcoin update – this Saturday. Stay safe in the markets for now, Happy Trading!