The Bitcoin market dropped a bit on Thursday as we continue to hang around the $30,000 level. The $30,000 level is an area where we have seen a lot of noise, as there have been both buyers and sellers trying to settle whether or not we are going to continue going lower, or if we can get some type of short-term bounce.
$30,000 is a large, round, psychologically significant figure that could attract a certain amount of attention, as it has been important previously. The market had formed a bit of a hammer last week, so if we were to break below that level, the $25,000 level would be targeted, and then perhaps open up the possibility of even further selling. Bitcoin is pretty far out on the risk spectrum, so we need to have a lot of risk appetite out there to see Bitcoin really take off. As there is a lot of fear around the world, it makes sense that Bitcoin will get hammered.
On the other side of the equation, you have the US dollar which has strengthened and continues to do so. Because of this, the market will more than likely continue to fade short-term rallies, and if we do break down below that hammer, the momentum is going to continue to strengthen, and I think at that point we could see Bitcoin go falling to the $20,000 level. The market breaking out above the $32,000 level would be bullish, but even then I think that there would be even more resistance near the $35,000 level, perhaps even the 50-day EMA. That being said, I would anticipate sellers coming into the picture somewhere around there, so I do not necessarily think this is a scenario where we would find ourselves. However, if we do it is likely that we would see a significant selloff unless the Federal Reserve decides to change its overall attitude. As the Federal Reserve continues to see a reason to tighten monetary policy, we will continue to see all risk assets get hammered, including this one. If we break down below the $20,000 level, things could get rather ugly as we drift into “crypto winter.” The only way I see Bitcoin rallying for a significant amount of time as if the Federal Reserve steps away.
