The BTC/USD has rallied ever so slightly during the trading session on Wednesday but we still see a lot of negativity and it certainly looks as if Bitcoin is threatening a major breakdown. At this point, it is likely that we will continue to see Bitcoin flush much lower, and therefore it’s likely that we would see Bitcoin unwind quite drastically.
The size of the candlestick is not that impressive, especially when you look at it through the prism of the previous session, and the lack of volume tells me that this market is short covering during the day. If we break down below the $18,000 level, is very likely that we will see Bitcoin take a serious beating. In that scenario, it’s likely that Bitcoin could drop down to the $15,000 level, maybe even down to the $12,000 level. The $12,000 level is where we started the entire uptrend from, so it would be a huge round trip from the massive spike toward the $68,000 level.
Wait for Signs of Exhaustion
- Keep in mind that this market is highly sensitive to risk appetite, and risk appetite is very poor now.
- At this point, I think it’s only a matter of waiting for some signs of exhaustion after a bounce, especially if we were to get anywhere near the 50-Day EMA.
- On the other hand, if we do break down below the $18,000 level, I will not hesitate to short there either.
From a longer-term perspective, I would look at a return to the $12,000 level as a potential opportunity to pick up a little bit of value, and then start building a huge position over the longer term. This of course assumes that Bitcoin is going to continue to attract institutional inflows, but it’s not until monetary policy changes that Bitcoin has any real possibility of sustaining a longer-term “buy-and-hold rally.” Until then, I think it is going to be very difficult for Bitcoin to continue to attract large inflows of money. In this environment, if you are patient enough you will more likely than not see an opportunity to pick up Bitcoin “on the cheap.” In that scenario, I will be building up in what should end up being an accumulation phase in the longer term. I suspect that we probably have several months ago before that actually happens.
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