Trading Bitcoin: $8k Incoming?

$8k Incoming?

$8k Incoming? Bitcoin had a tough weekend as price declined 11% yesterday. Today, price has bounced off the 50MA (gray) on the chart above. While price has decreased, Bitcoin still has a large cluster of support at roughly $9.5k – $10k. Not only is the 50MA acting as support, but the previous set up trend line from the sequential indicator is acting as support. Additionally, the 0.382 fibonacci level remains at $9.5k, which is currently Bitcoin’s strongest support level. Bitcoin is on a red 5 of 9 candle on the daily chart above. Therefore, sequential is telling us price action will continue to be bearish. If Bitcoin falls and closes below the 50MA, a further decline to support at the $7k-$8k price region is probable.

4 Hour

Bitcoin’s sequential indicator has just undergone a price flip to a green 1 candle. However, price has closed below the 200MA which will act as resistance. Furthermore, the sequential trend line at 10.5k is also acting as resistance as the bulls attempt to regain momentum. According to sequential theory, a green or red one is considered to be in a no-trade zone. Until a green 2 closes above a green 1, price remains in a no-trade zone.

NVT Indicator

Throughout the course of this newsletter, we have followed the NVT Indicator for months. As you can see on the chart above, Bitcoin’s NVT indicator has been overbought since April 2019. However, yesterday was the first time the NVT broke below support at 150. After the NVT indicator broke support when Bitcoin was at $6k, price experienced a 30% pullback. Bitcoin may soon experience a pullback of this magnitude if support at $9.5k – $10k does not hold. A 30% correction from our current level would place us at a target price in the $7k – $8k price region. A decline of this proportion would present an excellent opportunity to buy the dip.

Cryptocurrency News

Bitcoin’s mining difficulty is the highest it has ever been which means the network is more secure than ever before.

In other news, police in eastern China raided a mining farm which was allegedly operating using stolen electricity. The farm apparently stole nearly 20 million yuan ($3 million) in electricity and approximately 4000 mining devices were confiscated. Judging by the chart below, it is difficult to determine if the raid had a significant impact on Bitcoin’s overall difficulty level.

Conclusion

Bitcoin is experiencing a reaction rally after a steep 11% decline on Sunday. The sequential indicator remains bearish on the daily chart and neutral on the 4 hour. If price cannot hold support at $9.5 – $10k, expect another harsh correction. For now the trend is neutral and remains in a no-trade zone.