Dropping again below $53,000.00, Bitcoin (BTC) surprised many traders this week. Following a weak job report in the U.S. economy, many investors have possibly begun to brace for a recession. Is it actually time to panic sell? Let’s dive into the technicals to see where the crypto market is at!

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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.

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Bitcoin

As discussed in last week’s report, Bitcoin, against the dollar (USD), has been ranging in a parallel channel since last March. After failing to break out from the midpoint of the channel, BTC had been trying to find support at the $58,740.00 horizontal level. However, the level failed to hold, and price again fell to the bottom of the parallel channel. It also wicked into a minor support level at $52,800.00. Despite the price hanging by a thread, the downsloping support of the channel has acted as a decent bounce point. Buying at the current price level presents better risk-reward than buying near the top of the channel.  

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Regarding current horizontal supports and resistances, there is some demand around the $52,800.00 level. However, price going even below that would be bad news for BTC. The next support after that would be at the $48,900.00 level and then further down at the $43,700.00 level. The previous support at $58,740.00 is now acting as a supply/resistance level. 

To get a broader view, one could also zoom out to larger timeframes. For example, looking at Bitcoin from a weekly chart makes it appear just like previous consolidations this cycle. The pattern Bitcoin is forming on the weekly chart could also be considered a bull flag, which is a bullish continuation pattern that could signal more upside. 

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Another common indicator many traders use is the moving average (MA). These act as dynamic supports and resistances, showing the average price over a certain time period. Common moving averages include the MA 20, 50, 100, and 200. The weekly MA 50 has historically been a good level to watch for Bitcoin. Currently, BTC is also testing it as support. 

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Fundamental Factors

Trading goes beyond the charts, and sometimes, it helps to pay attention to macroeconomic factors. Bitcoin dropped to $52,550.00 last September 6, 2024, due to weak U.S. jobs report data. While the unemployment rate came in line with analyst expectations at 4.2%, the labor market only added 142,000 nonfarm payroll jobs. This was below the expected 164,000. Weak jobs data tends to bring down the U.S. stock market, reflected in the 2.17% drop in the S&P 500 last Friday. Fears of a slowdown in the economy and even a recession cause investors to be more cautious, which leads to selloffs. Since Bitcoin is considered a risk asset similar to stocks, its price also correlates with the U.S. stock market. Paying attention to these factors can help one's trading. 

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Ethereum

Ethereum has continued to bleed with a weakening Bitcoin. After breaking down from its parallel channel and retesting it as resistance, Ethereum fell to the $2,150.00 level again. This is a crucial level because more downside could signal a longer downtrend for ETH. Should this support hold, $2,770.00 should act as resistance. Downside support targets include the $1,930.00 level and the $1,680.00 level. 

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Bitcoin Dominance 

Surprisingly, Bitcoin Dominance (BTC.D) has been declining the past few days. This is seen in a weaker selloff in altcoins compared to the past few months. 

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. 

However, it is important to remember that BTC.D is still in a long-term uptrend. Most money will continue to flow into Bitcoin until this trend breaks. 

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Fear and Greed Index

Gauging market sentiment is also another valuable way to trade. The Crypto Fear and Greed Index is a tool used to gauge the sentiment of the cryptocurrency market. It assesses whether investors are feeling fearful or greedy. The index is based on a scale from 0 (extreme fear) to 100 (extreme greed). It is usually best to go against the majority sentiment in the Fear and Greed Index. As Warren Buffett said, “Be greedy when others are fearful, and be fearful when others are greedy.”  

As of writing, the index shows that the market is fearful, with yesterday even dropping to extreme fear. This usually presents a good buying opportunity. Historically, after periods of extreme fear, markets tend to recover as investor sentiment stabilizes. Those who do buy during these fearful times often benefit when the market shifts back towards neutral or greed.

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Afterword 

Although the cryptocurrency market offers many opportunities to make money, it also offers many chances to lose it. As responsible traders and investors, we should only risk what we can afford to lose. Moreover, it is important to always do our own research and not just follow advice from friends or financial influencers. We can’t always expect the markets to go our way. Nevertheless, continuing to practice and learn technical analysis can eventually yield better results. Keep trading and try to make the best of the markets! 

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