Bitcoin price again showed a weak trend after being rejected at the resistance level of $11,000. As Bitcoin (BTC) enters the fourth quarter, market sentiment remains cautious and neutral in general.
Due to some key factors, Bitcoin may face greater risk of correction in the fourth quarter. In the past three years, every September has closed down. The same is true in September 2020, indicating that Bitcoin’s price direction is unclear.
From March to August, the favorable financial environment, low interest rate environment, and trillion-dollar stimulus plan prompted the simultaneous rise of Bitcoin and the stock market. In the next few months, due to the US presidential election in November, it is increasingly likely that the approval of the economic stimulus plan will be delayed. The growing uncertainty of the US macro environment and financial markets may put pressure on Bitcoin.
Traders are usually cautious in the short term and optimistic in the medium to long term. Technical analysts have determined that the key price levels of BTC are 9800 USD, 10700 USD and 11800 USD respectively. As long as Bitcoin remains between US$9,800 and US$10,700 or US$10,700 and US$11,800, volatility is expected to be very low. Therefore, although traders are cautious about Bitcoin’s recent trends, many people do not believe that Bitcoin will fall sharply.
As a potential price area of interest, traders are considering that when the price of Bitcoin is closed on weekends or holidays, it may fall below the $9,600 gap formed by the Chicago Mercantile Exchange (CME) Bitcoin futures market. The US$9,600 gap has not yet been covered, and given that most CME gaps tend to be covered, this level is still a target.
Short-term bearish structure
Bitcoin’s monthly candle closed below $11,000, which will confirm September as a red candle (referring to a decline). In technical analysis, if the closing price of a new candle is lower than the closing price of the previous candle, it is called “bear market engulfing.”
In addition, the monthly closing price of Bitcoin was reached after repeated rejections, because BTC has set a new low on the daily chart for four consecutive days since August 17. When the most recent peak is lower than the previous peak, a lower high pattern will appear. In this case, the peaks of Bitcoin are $12,468, $12,050, $11,179, and $10,950.
Bitcoin faces two bearish technical patterns and structures on the monthly and daily charts. In technical analysis, these two time frames are regarded as high time frame line charts, which may increase the possibility of short-term corrections.
On September 28, the price of Bitcoin broke through the resistance level of $10,800. But an anonymous trader named “Byzantine General” said that this is likely to be a bull trap. Among the major exchanges, Bitcoin rose to as high as $10,950, but it has been “withstanding” resistance. When Bitcoin struggles to break through key resistance levels, a bull trap is very likely.
hint.
When Bitcoin consolidates above the support level and continues to hold on, it is almost a bull trap.
When Bitcoin suddenly drops, it usually plunges and does not give anyone a chance to enter.
-ByzGeneral (@ByzGeneral) September 29, 2020
Bitcoin’s recent drop from $10,950 means rejections on monthly, daily and hourly time frames because they show a cautious/bearish structure in the short term. If this happens at the same time as the monthly closing candle, it may magnify the recent downtrend.
Bitcoin’s historical performance in the fourth quarter
The historical performance of Bitcoin shows that there is a downward trend, because in the past two consecutive quarters, BTC has fallen by 42.46% and 13.59%, respectively. Given Bitcoin’s poor performance in the last quarter of the past two years, the possibility of slow growth in the fourth quarter is still very high.
However, after the 2016 halving, Bitcoin performed well in the fourth quarter, increasing from $613.98 to $998.33. Bitcoin is currently in a halving cycle, and if it follows past trends, it may gradually climb in the next 12 months. In the 2016 halving cycle, Bitcoin took 15 months to reach a peak of $20,000, which has been the highest price in history.
An uncertain financial market
In the past month, due to the new crown pneumonia pandemic, the U.S. stock market has continued to slump. Due to the lack of economic stimulus and vaccine uncertainty, concerns about the second wave of the epidemic have been heightened. The economic stimulus package will ease economic pressure and issue direct checks to individuals, thereby increasing the overall liquidity of the market.
However, Bitcoin, gold, stocks, and risky assets entered the fourth quarter without stimulus measures. New crown pneumonia cases have surged, and due to the US election in November, Washington has reached a deadlock in economic stimulus policies. According to reports, the Democrats in the House of Representatives are preparing a stimulus package that directly pays $2.4 trillion. It is uncertain whether this plan will be passed before the presidential election.
Therefore, throughout September, investor confidence has been low. According to Bank of America data, investors withdrew $25.8 billion from the stock market last week. This was the largest single-week capital outflow since June 2019, when trade war concerns intensified. Bank of America analysts pointed out in a report that the lack of clear economic stimulus measures is a catalyst for capital outflows, and pointed out: “Given that the largest fiscal stimulus has passed, and there are no clear macro-control measures, taking into account stocks and credit In the next six months, it will be difficult for policies to catalyze a substantial increase in the stock market and credit.”
Although the Bitcoin stock market has become less and less relevant and more relevant to gold, in general, Bitcoin is still affected by the overall financial market sentiment. In an interview with Cointelegraph, Denis Vinokourov, head of research at the cryptocurrency exchange and broker Bequant, stated that macro and political developments have been driving the development of cryptocurrencies:
“Macro and political developments have become an increasingly important factor driving all market sentiments, and digital assets are no exception. It is widely expected that the uncertainty around the US election will cause a lot of turbulence. The risk of spillover is considered high, but Interestingly, despite the downturn in spot market prices, the implied volatility of Bitcoin and Ethereum remained stable.”
On-chain indicators are bullish
Since June, on-chain indicators have continued to show that Bitcoin is in a bullish trend. Various on-chain indicators (including whale activity, holding activity, address activity, computing power, and dormant supply) indicate that Bitcoin is in a healthy hoarding phase.
For example, Rafael Schultze-Kraft, CTO of Glassnode, cited the “Bitcoin short-term holder MVRV” indicator to show that Bitcoin is at a critical point. He said that when the on-chain indicator reaches 1, it indicates a trend reversal. The last time it reached 1 was in March, when Bitcoin rebounded from a sharp decline to $3,600. Kraft said:
“The Bitcoin STH-MVRV ratio has been above 1 since April. The current test support line is at 1 (an indication of a trend reversal)-short-term holders are valuing Bitcoin at its actual price. As long as we maintain this Level, it can be bullish.”
Soona Amhaz, general partner of Volt Capital, mentioned the address activity of the Bitcoin blockchain and confirmed the healthy mood of users, and said that this indicates a substantial increase in the number of users. In general, the technical structure points to short-term weakness and long-term hoarding. In the foreseeable future, the uncertainty of the financial market may intensify the selling pressure of Bitcoin, but the on-chain indicators reflect that the Bitcoin network is growing at a healthy and gradual rate.
