Is the bull market back on? After an eventful Federal Open Market Committee (FOMC) meeting on September 18, Bitcoin (BTC) and the crypto markets finally rallied again. Cutting interest by 50 basis points (bps) might just be what Bitcoin needs to reach new highs. Let’s dive into the technicals to see where the crypto market is at!

Disclaimer*

I am not a financial advisor. The content is for informational purposes only. You should not construe such information or other material as legal, tax, investment, financial, or other advice. Nothing in this report constitutes a solicitation, recommendation, endorsement, or offer by any entity to buy or sell any securities or other financial instruments in this or any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

‍

Bitcoin

Last week, Bitcoin, against the dollar (USD), tested the $58,740.00 horizontal level as support. Since then, the level has successfully held through the channel midpoint at $61,000.00. It is currently trading around the $63,200.00 level at the time of writing. Being above a channel midpoint is considered bullish as it opens up the possibility for an asset to climb to the top of the channel. This currently coincides with the 2021 Bitcoin high at $69,000.00. 

‍

Regarding short-term supports and resistances, there is some support around the $61,685.99 horizontal level, which is the close of the August 8, 2024 bullish engulfing candle. Combining this level with the channel midpoint around $61,000.00 should provide a strong area of demand. The top of the August 24 - August 27 “Tower Top” (bearish pattern) should provide some resistance for BTC/USD. This supply level is at $64,955.00 or approximately $65,000.00. Should Bitcoin be able to break this level, it could easily reach $69,000.00 or even make a new high. 

While Bitcoin certainly looks bullish, it always helps to pay attention to other factors. For example, BTC is again testing the 200-day moving average (MA). Moving averages act as dynamic supports/resistances and many traders use them to identify a trending market. The daily MA 200, in particular, is used by many traders to determine if an asset is in an uptrend. If the MA is sloping up and price is above it, the asset is in an uptrend. If the MA is sloping down and price is below it, the asset is in a downtrend. Currently Bitcoin is below the MA 200 and it is beginning the slope down which could signify bearishness. The MA 200 has also acted as a key pivot level for Bitcoin so it would be wise to watch this indicator closely. Breaking out from the MA 200 would definitely be bullish for BTC/USD, while rejecting from it could signal more downside. 

‍

Fundamental Factors

As discussed in last week’s report, the interest rate cut by the U.S. Federal Reserve (Fed) would be crucial in determining where risk assets could go. The recent decision by the Federal Reserve to cut interest rates by 50 basis points (0.5%) definitely had a significant impact on financial markets. Following this rate cut, BTC/USD surged around 6%, pushing its price above $63,000. This rally is largely driven by lower interest rates, which reduce the cost of borrowing, encourage investment, and weaken the U.S. dollar, overall benefitting assets like Bitcoin that are seen as inflation hedges. 

However, this large rate cut also raises concerns about the broader economy. Typically, when the Fed cuts rates by a smaller amount, like 25 basis points, it signals confidence in the economy’s resilience. On the other hand, a 50 basis point cut may indicate growing fears of an impending recession. Some analysts warn that although this move has led to short-term gains in risk assets, it could be a bearish sign longer-term if it reflects deeper economic trouble. A sharp rate cut may suggest that the Fed is seeing weakness in the labor market or slowing growth, which could eventually harm risk asset prices, such as Bitcoin and the broader crypto market. While the immediate response to the rate cut has been positive for markets, there are underlying risks that the Fed's aggressive action could point to economic challenges ahead.

‍

Ethereum

Ethereum (ETH), against the USD, is still ranging between the $2,150.00 and $2,770.00 levels. However, it has since then been able to break past the midrange at $2,460.00, much like Bitcoin has. This opens up ETH, to target the $2,770.00 level. The midrange at $2,460.00 should act as support and $2,770.00 should act as strong resistance, since it coincides with the low of the parallel channel that ETH broke down from. 

‍

Bitcoin Dominance 

Bitcoin Dominance (BTC.D) has finally reached the major resistance at 58.33%. It has then rejected from the level and retested the top of the recent horizontal range at 57.70%. Should 58.33% continue to act as resistance, BTC.D could retest the parallel channel low at 56.80%. 

BTC.D reflects the amount of money flowing into BTC vs. other cryptocurrencies. For example, if BTC.D is rising, investors are putting more money into BTC, whereas when it is falling, investors are putting more money into other cryptocurrencies. Rejecting from a major level like 58.33% would reflect altcoin strength and could lead in the start of a possible altcoin season. However, it is very difficult to figure out when a long-term trend will break. For now, BTC.D is still in an uptrend, meaning most money is still going to BTC. 

‍

Fear and Greed Index

The Crypto Fear and Greed Index is a great tool to be looking at during this time. It gauges the sentiment of the market, checking if investors are feeling fearful or greedy. From feeling extreme fear 2 weeks ago, investors are currently feeling more neutral about crypto. This is reflected in rising prices and positive news like the FED cutting interest rates. 

When trading the Fear and Greed Index, it is usually best to go against the majority sentiment. People who bought when the sentiment was fearful, were able to take advantage of panic selling and got their assets at a discount. However, it is still not the best time to sell everything. Anyone who bought assets 2 weeks ago may have more upside with the sentiment still not being greedy. However, it would certainly not be a bad time to take some skin off the game. One can never go broke taking some profits!

‍

Final Thoughts 

While it is easy to feel all cheerful because the markets are up, these times aren’t generally the best to be buying. Prices were much lower last week. Although one wouldn’t have known how the charts today would turn out, it’s helpful to know that there will be better opportunities to stack up. Should one choose to buy now, they need to be prepared for much more downside should the market decide to tank. Keep trading and try to make the best of the markets! 

‍