Bitcoin markets initially pulled back towards the $40,000 level on Friday before bouncing and reaching towards the 50-day EMA. The 50-day EMA is an important technical indicator for cryptocurrency markets because so many traders pay close attention to it. Ultimately, I think this is a market that will continue to see a lot of noisy behavior, but I also recognize that it is going to be all about the Federal Reserve tightening and whether or not it is going to affect risk appetite, so it is likely that the crypto markets will respond in kind.
Looking at this chart, the 50-day EMA has been relatively reliable, but also the 200-day EMA is dropping from here and it looks as if the market is probably going to continue to look at both of these moving averages as a potential barrier to growth. At this point, it looks like we are in a massive consolidation area, with the $45,000 level offering resistance and the $35,000 level offering support. I think at this point we are trying to build up the confidence to break out, but right now it just does look like we have enough momentum. That is the one thing that the market desperately needs: momentum.
The $40,000 level has been like a magnet for price, and I think that will probably continues to be the case. With this being the situation we find ourselves in, I am not overly enthusiastic about getting involved in Bitcoin, but it is at least stabilized and that is the first sign of strength. Ultimately though, it will come down to risk appetite and monetary flows. Right now, there is not much flowing into Bitcoin, so I think you have plenty of time before you have to put any money to work. If we were to break down below the $35,000 level, then it is very likely that this market will wind down to the $30,000 level quickly. Breaking down below there is like opening a major “trapdoor” for the market to plunge much lower. Because of this, I think we have a situation in which range-bound trading might be the way to go going forward, at least until we can get out of this box that I have planted on the chart.
