A move above the resistance point at 20,500 will invalidate the bearish view.

Bearish view

• Sell the BTC/USD pair and set a take-profit at 18,500.
• Add a stop-loss at 20,500.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 20,500 and a take-profit at 21,500.
• Add a stop-loss at 18,000.

The BTC/USD currency pair continued slumping on Monday morning as the recent sell-off continued. Bitcoin dropped to a low of $19,788, which was the lowest level since July 14 of this year. It has fallen by more than 20% from the highest point this month.

Hawkish Federal Reserve

Bitcoin, other cryptocurrencies, and stocks dropped sharply after Jerome Powell’s speech at the Jackson Hole Symposium in Wyoming.

In his speech, Powell warned that the Fed was still concerned about the significantly high inflation in the country. As a result, he said that the bank will continue hiking interest rates in the coming months. He also hinted that the Fed will likely leave interest rates at elevated levels in 2023.

His statement came a few days after Joe Biden announced that he will forgive student debt for millions of Americans. Some analysts believe that this debt forgiveness will cost over $1 trillion in a decade. It will also likely lead to some inflation in the coming months.

Powell’s statement mirrored that of other Fed officials like Mary Daly, Neel Kashkari, and Charles Evans. Therefore, there is a likelihood that the Fed will hike interest rates by 0.50% in the coming meeting in September.

Historically, Bitcoin and other risky assets tend to do well in a period when the Fed has embraced a more hawkish tone. The recent rebound was mostly because analysts were expecting the bank to start slowing its rate hikes and even start cutting in 2023.

Bitcoin’s crash coincided with a sharp decline in American equities. The Dow Jones crashed by over 1,000 points while the S&P 500 and the Nasdaq 100 indices dropped by over 3.3%. The futures market also signals that American shares will open sharply lower.

BTC/USD forecast

The four-hour chart shows that the BTC/USD price formed a triple-top pattern in July and August. It also formed a bearish flag pattern that is shown in green. In price action analysis, this pattern is usually a bearish sign. It also moved below the 78.6% Fibonacci Retracement level and the 25-day and 50-day moving averages.

Therefore, the pair will likely continue falling as sellers target the year-to-date low of 18,624 since it seems like they are in control. A move above the resistance point at 20,500 will invalidate the bearish view.

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The pair will likely keep falling as bears target the first support of the standard pivot point at 19,780.

Bearish view

• Sell the BTC/USD pair and set a take-profit at 19,700.
• Add a stop-loss at 22,500.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 21,800 and a take-profit at 22,500.
• Add a stop-loss at 20,000.

The BTC/USD price declined sharply as concerns about the global economy continued. Bitcoin dropped below the important psychological level of $21,000, which was sharply lower than this month’s high of over $25,000.

Volatility and US dollar rises

The BTC/USD price declined sharply in the overnight session as global volatility rose sharply. The closely watched CBOE volatility index soared by more than 17% in the overnight session. In the same period, the US dollar index surged to over $109, which was higher than this month’s low of about $104.

The dollar index has surged in the past few days as Federal Reserve officials warned that they will continue hiking interest rates and implementing quantitive tightening even as inflation cools. Last week’s minutes hinted that the bank will hike by 0.50% in the coming meeting.

The BTC/USD sell-off coincided with the sharp increase of US Treasury yields. The yield of the 10-year yield surged to above 3% for the first time in weeks. Bond yields have an inverse relationship with their price movements.

At the same time, American indices like the Dow Jones, Nasdaq 100, and S&P 500 all dropped by more than 2% in the overnight session.

The same sell-off happened in other assets as well. For example, the prices of key commodities like crude oil, copper, gold, and silver declined. The sell-off also happened after signs of a recession continued to emerge.

For example, the Chinese central bank decided to slash interest rates for the second time since May this year. This happened after a series of weak economic data from the country and signs that the housing market was struggling. In addition, the UK Office of National Statistics (ONS) showed that the country’s economy contracted at a faster pace than expected in 2020.

BTC/USD forecast

The four-hour chart shows that the BTC/USD price found a strong resistance level at 25,258. It then dropped sharply and invalidated the ascending triangle pattern that is shown in purple. It moved below the 25-day and 50-day moving averages. The pair moved below the standard pivot point.

Therefore, the pair will likely keep falling as bears target the first support of the standard pivot point at 19,780. A move above the resistance point at 22,000 will invalidate the bearish view.

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• BTC/USD has drifted a little bit lower during the trading session on Monday, losing 1%.
• We are sitting in an area that has been supported a couple of times in the past, and now looks to be important from a short-term perspective.
• The $21,000 level has been an area that people have been fighting over for a while, so it does make a certain amount of sense that we would see this market mess about in this area.

I anticipate that there is probably a lot of support extending down to the $20,000 level, so in this area, I would anticipate that there probably will be plenty of buyers. However, if we do break down below the $20,000 level, it is likely that the Bitcoin market will start to fall rather drastically, and probably drag the rest of the cryptocurrency market with it. It is worth noting that the US dollar is strengthening quite drastically, and therefore will have an effect on Bitcoin. Furthermore, as monetary policy continues to tighten, people will worry about risk appetite. Risk appetite falling leads to lower pricing of Bitcoin and other cryptos in general.

Rallies at this point will more likely than not end up being looked at with suspicion, with the 50 Day EMA sitting just below the $24,000 level offering a bit of resistance. Beyond that, we have the $25,000 level, which has recently offered quite a bit of selling pressure. Because of this, I think you need to keep looking at this market through the prism of one that is in a downtrend, and that has not changed. In fact, it’s very likely that we will continue to see a lot of negative pressure, and a breakdown below the $20,000 level could kick off a bigger move to the downside. If that happens, we could see Bitcoin unwind all the way down to the $12,000 level over the longer term. It is worth noting that the $12,000 level with where the entire bullish run had kicked off from.

On the upside, if we can clear the $25,000 level, then it’s likely that we will go looking to reach the $28,000 level, which is the beginning of a major area of noise that extends all the way up to the $32,000 level.

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The BTC/USD market has fallen significantly during the trading session on Friday, losing over 7% as the market is now approaching the $21,000 level. The 50 Day EMA has been left in the rearview mirror, and now it looks like we are very likely to see Bitcoin drop down to the $20000 region quite quickly.

• The $20,000 level has a certain amount of psychology attached to it, and it would also cause a lot of noise.
• That’s an area where we had seen a lot of support previously, so that is an area where you would anticipate there should be some buyers based upon value. 
• If we were to break down below that level, it’s likely that the market would probably drop down to the $12,000 level. It is at the $12,000 level that a lot of people believe that the market will bottom.

The $12,000 level is where we broke out from previously, so it would be a complete round trip for what we had done during the last bullish move, and at this point, I think it would not be a huge surprise to see that happen. The $25,000 level had been a major resistance and psychological barrier, and the fact that we have pulled away from it so quickly now, suggests to me that there is going to be some follow-through. After all, the market continues to see a lot of risk appetite being eviscerated, and that is horrible for Bitcoin. After all, Bitcoin is pretty far out on the risk spectrum, and therefore times have to be good in order for Bitcoin to continue going higher.

The size of the candlestick does suggest that we have much further to go, and with that being the case, it’s likely that we will try to see plenty of sellers willing to step into this market at the first signs of exhaustion. I think the US dollar is going to continue to cause major issues, and as long as that’s going to be the case, nothing is going to get in its way, including cryptocurrency. Bitcoin is likely to take a punch in the face over the next couple of weeks, but if we were to turn around and rise above the $25,000 level, it would be a complete change of scenery, opening up a potential move to the $20,000 level.

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If we start to see rates and the dollar fall, then it’s likely that we will see Bitcoin jump into the mix and go much higher.

• Bitcoin has drifted a bit lower again during the trading session on Thursday.
• It looks like the cryptocurrency markets are simply killing time at this point.
• Tthis is a market that needs to see a lot of risk appetite out there, due to the fact that Bitcoin is so volatile, and of course, is pretty far out on the risk appetite spectrum.

Bitcoin Breakdown – What You Need to Know

It’s worth noting that the $25,000 level continues to offer a significant amount of resistance, and now that we are hanging around the 50 Day EMA. It’s very possible that we will see a bit of a squeeze in this general vicinity. If we break down below the $23,000 level, then it’s possible that we could drop from here. If we drop from here, then I anticipate the BTC/US currency pair could drop down to the $20,000 level. The $20,000 level is an area that will attract a lot of attention due to the fact that it is a large, round, psychologically significant figure, and an area where we have seen support previously. If we were to break down below the $20,000 level, it’s likely that Bitcoin will get cratered.

On a break down below that level, then we are talking about a potential move down to the $18,000 level, followed by the $12,000 level. Alternately, if we were to turn around and take out the $25,000 level, then it’s possible that the $28,000 level will be targeted. Above the $28,000 level, it’s very noisy all the way to at least the $32,000 level. Ultimately, this is a market that has a lot of work to do in order to change the entire trend, and it’s not until we break above that $32,000 level that I would be convinced. Because of this, I think we have more noise than anything else ahead of us.

The Bitcoin market will have a lot of negative correlation to the US dollar and the interest-rate markets, so you need to see whether or not the rates are rising over the dollar strengthening which would work against the value of the Bitcoin markets. However, if we start to see rates and the dollar fall, then it’s likely that we will see Bitcoin jump into the mix and go much higher. In general, I think this is a market that continues to see volatility more than anything else.

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This is a situation where we have seen a nice recovery, but at this point, we are still very much in a downtrend.

• The Bitcoin market had initially tried to recover during the trading session on Wednesday.
• It then gave back gains to show signs of exhaustion.
• The Bitcoin market has been relatively positive for a while, but Bitcoin does not work by itself and lives in a vacuum.

The $25,000 level above continues to be difficult, and therefore I think if the market were to pay close attention to that level as we have been for a while, it does make a certain amount of sense that we have seen a lot of trouble yet again. In fact, I believe that the $25,000 level might end up being the top, but we will have to wait and see what the bond market does. This is because Bitcoin does not work outside of the rest of the financial world anymore. After all, there has been a lot of institutional money flying into the market, which has been good for the price previously, but it also means that Bitcoin will start to act like a more mature financial asset.

The shape of the candlestick is a bit of a shooting star, and therefore it shows that exhaustion may continue to be a problem. The 50 Day EMA sits below current pricing, near the $23,434 level, and is rising. You need to pay close attention to the bond market, because the yields rising will make a negative environment for risk appetite, and then by extension some of these more volatile assets such as cryptocurrency. This is what happens when the big players enter a market.

However, the Federal Reserve and other central banks are going to be meeting in Jackson Hole next week, and it’s possible that we could see the central banks try to talk down the markets going forward. This is a situation where we have seen a nice recovery, but at this point, we are still very much in a downtrend. If we break down below the 50-Day EMA, then it’s possible that the market could go down to the $20,000 level at that point, as it is a large, round, psychologically significant figure, and makes for a nice target. On a breakout above the $25,000 level, the next major resistance barrier is found at the $28,000 level.

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The market could also be one of the first places money comes flying out of it we have issues with risk appetite and see things like stocks get hammered.

• The BTC/USD currency pair pulled back a bit on Tuesday as we continue to see Bitcoin pullback from the crucial $25,000 level the $25,000 level.
• Bitcoin has been rather resilient as far as selling pressure is concerned, but at the end of the day, I think we got a scenario where a pullback was necessary.
• The $22,500 level underneath is significant support, so it is possible that could be where we are aiming to get to.

If we were to turn around a break above the $25,000 level, that would obviously be a very bullish sign because we would be clear in an area that has already shown itself to be supportive previously and resistant now. The market breaking above that level also breaks above the top of a shooting star, which is also a very bullish sign as well.

Hoping for Hawkish Monetary Policy

Keep in mind that there’s a lot of speculation as to what the Federal Reserve is going to do and what monetary policy is going to be like going forward. If they do in fact have to become a little bit less hawkish, that is good for Bitcoin because it means that risk appetite will return. Remember, Bitcoin is about as far out on the risk appetite spectrum as you can get, so you will need to have other risk appetite-related markets rising as well.

The market could also be one of the first places money comes flying out of it we have issues with risk appetite and see things like stocks get hammered. In fact, it’s worth noting that the correlation between stocks in the United States and Bitcoin has been very strong over the last year or so, and because of this you need to be cognizant of what’s going on in those markets as well.

You should also probably pay close attention to the bond market in the United States right along with the US dollar because yields and the greenback work in direct competition with the Bitcoin market, which is now a much more mature market than it had been previously. There are a lot of institutional players in these markets now, so they will behave more like traditional assets. Gone are the days of 15% gains, as institutional players don’t like that type of noise. The good part of that is also 15% losses are probably gone as well.

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Right now I think we have more of a back-and-forth situation ahead of us.

• The BTC/USD currency pair initially rallied on Monday but turned around to give back those gains and show signs of weakness.
• Ultimately, the Bitcoin market is continuing to struggle with the $25,000 level, so it looks like we are going to continue to see a lot of trouble above.
• At this point, the market is very likely to continue pulling back in the short term, but I do see various signs of support underneath as well.

Market Confident But Lacks Volume

The fact that we are forming a shooting star suggests that we are going to continue to see selling pressure, but I also see that the $22,500 level is a minor support level, followed by the 50-day EMA. This has been a nice grind to the upside, and quite frankly that’s exactly what you want to see in Bitcoin because there have been so many negative traders out there that the market just squeezing higher slowly shows that we are building up a bit of confidence. However, there is a severe lack of volume and that is probably the one thing that concerns me.

I think we are essentially in a major “crypto winter”, but that doesn’t mean the end of the world. In fact, we have seen this before so it does make a certain amount of sense that traders will look at this through the prism of possibly being able to build up a bit of a bigger position for the good times. I think that it is probably only a matter of time before we see some type of attempt to grind much higher, but we need some type of catalyst.

Without a doubt, the biggest catalyst is going to be if and when the Federal Reserve decides it is going to loosen monetary policy. There is a lot of expectation at the moment that the Fed is going to be forced to be less aggressive with monetary policy, but with inflation as high as it is, I am a bit hesitant to get that excited quite yet. In other words, I think we have some work to do as we go back and forth and try to establish some type of foothold. A move below the 50-day EMA could have Bitcoin reaching down to the $20,000 level. However, right now I think we have more of a back-and-forth situation ahead of us.

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I think you need to look at this through the prism of buying dips as an investment.

• The BTC/USD currency pair rallied ever so slightly on Friday as we continue to grind back and forth.
• That being said there is a little bit of a “buy on the dip” mentality at the moment, but not necessarily anything that I would consider to be explosive or momentous.
• I think at this point in time it’s likely that we could get a little bit of a pullback, but I think also that there is a certain amount of accumulation going on which will probably be well for the long term.

Technical Analysis

The 50-day EMA sits just below the $22,000 level and could offer a bit of dynamic support. If we were to break it down below there, then it’s obvious that it would be a negative turn of events. Breaking down below all of that opens up the possibility of a move down to the $20,000 level. The $20,000 level is a large, round, psychologically significant figure that a lot of people will pay close attention to and breaking down below that could really open up the floodgates.

The alternate scenario of course is that we break above the $25,000 level, perhaps reaching the $28,000 level. The $28,000 level extends to the $32,000 level and should be a massive resistance barrier. If we can clear all of that, then it would obviously be a change of trend, and at that point, I think that Bitcoin could go much higher. If we were to see Bitcoin break above there, we would probably start to see some of the smaller markets react and rally as well.

A lot of this will come down to the US dollar, which is starting to try to strengthen itself again. A lot of people are banking on the Federal Reserve loosening monetary policy, and therefore boosting risk appetite. If the Federal Reserve starts to get tight again, that could have people running away from Bitcoin as well. Either way, I think you need to look at this through the prism of buying dips as an investment, but if you are a shorter-term trader, you should probably continue to go back and forth and try to build up a sizable account through a range bound system that is focused more on a lower timeframe going forward.

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The best way to handle Bitcoin is more likely than not going to be buying little bits and pieces if you are more bullish on the longer term.

• The BTC/USD currency pair has rallied significantly during the trading session on Thursday to reach the $25,000 level. However, the market has pulled back from there to show signs of exhaustion.
• The daily candlestick is forming a shooting star, which of course is a very ugly look.
• If we break down below the bottom of the candlestick, then it’s likely that the market could drop down to the $23,000 level.

If we do break down below that $23,000 level, then it’s likely that we could go down to the 50 Day EMA underneath. The 50-Day EMA sits right around the $22,000 level. Anything below there opens up the possibility of a huge drop lower, but I don’t think it’s very likely in the short term. Longer-term, it’s very possible, especially if we get some type of spike in interest rates were sell-off when it comes to risk appetites in general. Ultimately, I think this is a market that will more likely than not continue to be very noisy, and I do think that the Bitcoin market is still in the midst of trying to figure out whether or not it can turn around for the long term.

Even if we do break above the $25,000 level, it’s possible that we will just see more selling pressure near the $28 level. The $28,000 level extends all the way to the $32,000 level, meaning that it should be a major resistance barrier. The market breaking through all of that would end up being a major trend change, and I think everybody will jump in at that point. More likely than not, it’s likely that we go much lower, perhaps trying to get down to the $20,000 level.

If you are a longer-term investor, then you need to look at these dips as a potential buying opportunity, but you also have to be able to put up with quite a bit of volatility. In fact, the best way to handle Bitcoin at this point is more likely than not going to be buying little bits and pieces if you are more bullish on the longer term. That being said, the market continues to be very noisy, and therefore you need to be cautious about getting too deep into a position. In fact, it’s very likely that we can see a longer-term sideways market more than anything else, building up the accumulation phase before the next bullish market.

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