Bitcoin has broken significantly lower during the trading session on Monday to crash through the $40,000 level. That of course is a large, round, psychologically significant figure that a lot of people will be paying close attention to, so it does not surprise me at all that we have seen a bit of a follow-through. Now that we have broken through that level, it looks like the $36,000 level is going to be tested, which has been an area of significant support recently. If we breakdown through there, then the market is likely to go looking towards the $30,000 level after that.
The size of the candlestick does suggest that there is a bit of selling pressure, and it is worth noting that there is a major “risk off” type of attitude around the world, and that does not work for Bitcoin. Remember, Bitcoin is a significant “risk on” type of commodity, and trades as such. After all, the volatility of the Bitcoin market is very similar to certain commodities, so it needs people to feel good about taking risks in the market in order to get moving to the upside. Right now, there are far too many problems around the world to think that the Bitcoin market is going to suddenly take off.
While I know the whole idea of Bitcoin is to stay out of the system, the reality is that is no longer true. In order to use Bitcoin, you have to have an offramp into the fiat world 99.9% of the time. You simply cannot spend Bitcoin very easily, so it has now become a trading vessel. That is not to say that I think you should not trade the market, it is just that the whole idea of a separate monetary system is a farce at this point.
If we can turn around and recapture the $40,000 level, we probably have a good shot at recovering towards the 50 day EMA. However, I think it is much more likely we break down from here as there are far too many variables out there working against Bitcoin. The Federal Reserve tightening monetary policy also takes a lot of risk out of the market, so there is so much out there working against the value of Bitcoin right now that I just do not know how things change anytime soon.
