Will September Lead Bitcoin Into Rekt City?

Is Bitcoin Headed to Wrecked City?

Legendary 20th century investor, Bernard Baruch, once said, “Show me the charts and I’ll tell you the news.” When it comes to media for the masses, news is currently irrelevant. The media has an agenda to create a narrative of why an asset value moved the way it did. Too often in human psychology do people need a complex explanation for a simple event.

The global value and utility of bitcoin is not determined by Goldman Sachs deciding to drop their crypto trading desk or the fact that Shapeshift will no longer be anonymous. Additionally, the value of bitcoin never increased when Microsoft and Starbucks revealed plans to accept future bitcoin payments. Furthermore, It is clear that the news is not the best way to predict future market conditions. In any speculative market, there are metrics to probabilistically estimate where price or value is headed.

This week, the price of bitcoin went down simply because more people decided to sell than to buy. Bitcoin was facing very strong resistance levels ranging from $7,300 to $7,500. Also, the RSI was topped out at this range as well. After the decline from $7,300, the RSI dropped to a strong support level of around 40. At this point, we could likely see a series of dead cat bounces at the support level of $6,200 before testing another higher low around $6,100 – $5,800.

Volume is another significant metric to consider when evaluating the bullish rally of the last two weeks. Notice that the volume was extremely low during this two week rally period. This is not a positive indicator for the beginning of a strong bull rally. Volume increased with the recent decline to fall all the way to the support level of $6,400. Bitcoin faces strong resistance at $6,600 and if a potential break below the $6,200 support level we may witness additional higher lows into the $6,100 – $5,800 level.

Another metric worth paying attention to is the effects of seasonality on bitcoin and other US asset classes. Researchers Ben Jacobsen and Cherry Y. Zhang published a research paper in 2012 titled, ‘Are monthly seasonals real?. In their research they sought to determine whether or not seasonality was a significant indicator within market psychology. Their research included 300 years of UK market data while also analyzing the values of U.S. stocks. They concluded that December and April are the strongest months throughout the year, while September and May tend to be the weakest months.

Although bitcoin is only nine years old, BTC has historically been correlated with the general trends of seasonality. Throughout the last nine years, bitcoin has been choppy throughout September while often rallying throughout the last two months of the year. For this reason, if bitcoin were to move into a bull market it would most likely occur in the final weeks of October or early November. It may be wise for investors to look for a bottom throughout the months of September and October.

Over the past few weeks, the strength of the US Dollar has created many victims within all financial markets. After the Turkish Lira, the latest currency to lose significant value has been the Australian Dollar, which has reached new lows this week. Bitcoin is up against a strong dollar and currently people are turning to the dollar as a quality store of value.

Although it is possible bitcoin could bounce off of the 6,400 support level back to test the resistance at $6,800, it is likely that we will continue to trade in a sideways channel for an extended period of time until we find an absolute bottom. Ultimately, month after month, the macro trend continues to prevail.

Images are from tradingview.com

Disclaimer: I am not a financial advisor. This is not financial advice. Please do your research independently and make objective decisions. This article is intended to educate readers about the future of bitcoin through technical analysis. The author of the article owns cryptocurrency.