The price of Bitcoin (BTC) made a severe drop in the past week, similar to the heavy dropdown of the equity markets. However, equity markets have been showing strength this week with a strong relief bounce and today’s announcement from the United States Fed of a 50 bps rate cut.
Not only are equity markets showing strength, but a similar bounce is also being seen in the crypto markets as the price of Bitcoin rebounded from $8,400 to $8,950. But are the crypto markets finished with the retracements or is there more to come?
Crypto market daily performance. Source: Coin360
Price of Bitcoin reacts to Fed rate cut
Earlier today, the Fed announced to cut the rates by half a percent. The announcement came at 15.00 UTC, which immediately gave a reaction to the markets, as the price of Bitcoin shot up by $170 in the minutes after.
BTC USDT 1-minute chart. Source: TradingView
However, minutes later, the volatility starts to kick in for the markets, resulting in deep wicks and massive movements all over the fields. Not only is Bitcoin hopping around severely, but the same can also be stated about the commodity and equity markets.
BTC USDT 1-minute chart. Source: TradingView
Bitcoin price holds the 21-Week MA as support
BTC USD 1-week chart. Source: TradingView
The weekly chart of Bitcoin is showing clear support at the horizontal level between $8,200-$8,400 and the 21-week MA (moving average). However, after last weeks’ candle, there’s not much in favor of the bulls. A large bearish candle is inducing further downwards pressure.
The weekly chart shows that the price of Bitcoin is at a must-hold level, as the 21-week MA served as support throughout the entire bull cycle from 2014 till 2017. Losing such significant support would indicate further downwards pressure, targeting $7,500 and $6,800.
Bitcoin fighting with 200-day MA
BTC USDT 1-day chart. Source: TradingView
The daily chart is showing the support around $8,400, through which a bounce was warranted. The price of Bitcoin is facing its first resistance around $8,950, while it broke back above the 200-day MA.
The daily chart is further providing potential resistances and support levels. Some relief is expected after a massive drop of $1,400. Resistances above the current price levels are found at $8,950, $9,175 and mainly $9,350-9,400 level (previous support before the drop).
These levels are most likely getting a test for resistance before the price needs to come down to claim and confirm support at $8,400 or lower.
BTC USDT 6-hour chart. Source: TradingView
The 6-hour chart of Bitcoin is showing a clear rejection at the $8,950 level. Such a rejection confirms that the price of Bitcoin needs to retest lower levels for support, which the price is doing right now. Potential support can be found at $8,650-8,700 or in the green zone at $8,400 again.
The general conclusion is that the volume tapered off, an indication that the market is indecisive and range-bound.
Total market capitalization finding support above 200-day MA
Total market capitalization cryptocurrency 1-day chart. Source: TradingView
The total market capitalization of cryptocurrency is showing support in this area and still holding above the 200-day MA. The chart shows two support areas beneath the current price, one to be found at $238 billion and the second one at $224-228 billion (around the 200-day MA).
Holding at these levels would induce some upward potential, as the upper resistance is found at $267 billion. However, is there confirmation of a trend reversal?
Not yet. Losing the 200-day MA and the horizontal support would induce further downwards pressure, which means another drop of around 20%. It’s reasonable that traders and investors all over the market are patiently waiting for the next steps to take, as Bitcoin is not giving clear direction.
The bullish scenario for Bitcoin
BTC USDT 1-day bullish scenario chart. Source: TradingView
The bullish scenario remains unchanged and is still valid. The key factor is the support of around $8,300-8,400 and the 21-week MA. As long as that area remains support, there are arguments for upwards pressure towards the next resistance. Main resistances are found at $8,950, $9,175 and $9,300-9,400.
However, crucial would be whether the price of Bitcoin holds above the 200-day MA, which is a crucial indicator for traders for bullish or bearish momentum.
Through that, a second bullish scenario can be made from holding the 200-day MA. If the price of Bitcoin closes above it (which is currently above $8,700), further upwards momentum is warranted.
Finally, a retest of $9,300-9,400 doesn’t mean that the trend is bullish in general. A breakout above this level would warrant further upwards momentum. However, holding $8,300-8,400 could lead to a temporary upwards relief rally, while the crucial resistance at $9,300 is still essential to break.
The bearish scenario for Bitcoin
BTC USDT 1-day bearish scenario chart. Source: TradingView
The bearish scenario of Bitcoin provides a few scenarios. The key indicator for further downwards pressure would be losing the $8,300-8,400 support area. Through this, the 200-day MA and 21-week MA become resistances, and new downwards demand is likely. The next targets will be found at $7,700 from there.
However, a bearish retest of $9,300 would also induce further downwards momentum is warranted, and at least a retest of $8,300-8,400 is needed for further confirmation of direction.
Concluding, the crucial levels are $8,300-8,400 as support and $9,300-9,400 as resistances. Breaking through either of the two would warrant further information of the direction of the market.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Joseph Spezzano received a Masters Degree in computer science from The University of Massachusetts. Joseph has been working as a full-time blockchain programmer for the past 5 years. In his spare time, Joseph enjoys writing for CryptocurrencyInvestments.com and traveling.