When you're trading Bitcoin, you have to think in terms of months, not days.
Bitcoin markets fell again on Friday, as Bitcoin reached towards the crucial $40,000 level. This is an area that needs to hold, otherwise we could see even more accelerated selling. Towards the end of the day on Friday, we did see buyers step in to try to defend the $40,000 level, so that is a good sign. At this point in time, I think it is pretty easy to suggest that Bitcoin is oversold, but a lot of what people are focusing on is the Federal Reserve more than anything else.
Remember, institutional investors are involved in Bitcoin now, so it is going to start behaving much more like a Wall Street asset and a lot less like a completely decentralized asset. $40,000 has a certain amount of psychology behind it, but most Bitcoin believers that I know are looking at this as a potential buying opportunity. I do think that when we look back, this will be one of those great buying opportunities that crypto gives every once in a while, because it is so volatile.
If we can break above the top of the candlestick for the trading session on Friday, then I suspect that more buyers will step in to try to push this thing higher, perhaps towards the 200 day EMA. However, if we were to turn around and break down below the $40,000 level that would be a very bad thing indeed. At that point, I think we could see a very significant selloff. Nonetheless, that could determine a “crypto winter”, and the smart money would be building up positions during all of that. Clearly, fortunes were made last time we had a “crypto winter”, so I think it looks like this time will not quite be the same. I mean, I do not necessarily see Bitcoin being able to drop towards the $3800 level anytime soon. However, we could get something similar near the $30,000 level, maybe even the $25,000 level. I do not think that will happen, but it is one possibility that you need to keep in the back of your mind.
If we do turn around and start to rally again, this is going to be a slog, and not a shot straight up in the air. When you're trading Bitcoin, you have to think in terms of months, not days. Yes, sometimes it can rally 12% of the day, but the reality is that the more institutional money that flows into this market, the less those days appear.