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There is a lot to talk about today in the cryptoasset markets. Last night (September 24 UTC), Bitcoin ( BTC ) finally broke out of a months-long consolidation pattern to the downside, dropping 15% in a span of two hours.
The altcoin market was likewise sent into disarray, with most high-cap altcoins taking major hits even on their BTC pairings as a result of the drop. The picture is still fresh and the market very dynamic, and the only sure thing is that volatility has returned to Bitcoin.
We start with OKEx’s exchange token OKB, on the daily OKB/BTC chart. OKB had been doing quite well in a prolonged uptrend, holding above the 55-day exponential moving average (EMA) after cleanly holding a retrace into the golden pocket.
However, yesterday’s Bitcoin move has clearly put a damper on what had been a clean chart. In this atmosphere, it may prove a challenge for OKB to retake the 55 and resume consolidating within its support zone surrounding 27,000 satoshis. If it can’t, OKB may be forced back down for a kind of “reset” at 21k sats. We may notice, at least, that a decent amount of buy volume has come in to support OKB after the dump.
On the USD pairing, OKB is holding at a critical inflection zone at about $2.20. This would be a great place for OKB buyers to support the token, but this could just as easily continue its tumble down to $1.70 -- especially if Bitcoin gets another leg down, which it surely could.
Now for the main event. Yesterday, Bitcoin left behind about three months worth of consolidating price action. This price was eventually compressed around $10,000 into a range of a few hundred dollars, promising a huge return of volatility -- which has now come.
On this 4-hour chart, we see generally what happened. A bounce off the bottom of the range was briefly held, but a slow break of this uptrend quickly turned into a complete rout as traders saw the writing on the wall. Leading analysts have attributed this break down -- rather than up -- partially to what they say is the disappointing launch of the Bakkt custodial Bitcoin trading product.
Looking ahead, we must consider what this move means and where it might take price now. The main thing is that, what was looking like a grand uptrend for Bitcoin will now be challenged, and in fact is being challenged right now.
We can see this starting on the weekly chart. The 21 EMA is important here, because of Bitcoin’s history: during the previous grand uptrend between 2016-17, Bitcoin occasionally dipped below, but never closed below the 21 EMA on the weekly chart. During that period, it even managed to test the 55 EMA once or twice.
Here, the 21 is coasting at about $9,200 -- already left far behind. The 55 sits at about $7,750, and there is a very real chance of testing that level in the coming days. Ultimately, to continue fitting with this historical-bullish narrative, Bitcoin will have to reclaim the 21 EMA by the end of the week. There is plenty of time to do that yet, and such a tremendous reversal would be fitting and not uncharacteristic for the leading crypto.
Another historical benchmark during an uptrend that we can use here is the 100 simple moving average (SMA) on the daily chart. During the last uptrend, the 100 SMA was not lost for more than a few days at a time (three or four).
We can see on this daily chart, however, that the 100 has been lately lost for more than a week, even before the dip. This is a worrying sign, and Bitcoin should get back above the 100 before long if we are to continue considering an uptrend intact (if we still even do).
Next, we can use a Fibonacci retracement scale to get an idea of where we are within the market structure. Drawing a scale from the most recent fully engulfing swing point, in late April, we find that the present dip would put Bitcoin squarely within the Golden Pocket retracement level, between 0.618-65.
And here, an important inflection point lies exactly in this zone, from the May-June market structure. Also, just under the Golden Pocket, strong support is indicated by the post-2019 Volume Profile indicator. All of these indicators collude to point directly at the low $8,000 zone as strong support; this would be a very good place for Bitcoin to hold.
Finally, one last item to consider regarding Bitcoin’s current price range is worth mentioning. All the way back in July we covered the issue of the “ CME gap .” As we explained then in more detail, these gaps tend to always get filled, and in the end this one has proved to be no different.
Price has now dropped enough to finally put this ghost to rest, and Bitcoin is free to continue up without worrying about the only CME gap ever to go unfilled on its chart.
In all, this drop has damaged what had been a solid long term Bitcoin uptrend. The leading crypto is in a very critical moment, where the market for rest of 2019 and into 2020 will be decided. It could quickly recover here and sweep out the lows, and return up to safe levels as it has done during the last grand bull market; or it could communicate to the market that it is a different animal altogether.
If Bitcoin has been throttled in the last 24 hours, altcoins have been doubly throttled. Most were already having their own corrections after some solid gains during early September, and the Bitcoin crash has amplified the havoc.
Ethereum (ETH) is a good example. The leading altcoin had been holding up well in a modest correction on its ETH/BTC chart. But yesterday’s price action kicked that correction into overdrive, and ETH collapsed -- even against Bitcoin -- down into the Golden Pocket of its retracement range.
The good news is that it has been perfectly caught and held there, at least for now. A significant amount of sell volume may have already washed many of the sellers out of the market.
On the ETH/USD chart, the leading altcoin is a complete bloodbath due to the double-hit against both BTC and, subsequently, (BTC/)USD valuation. ETH is now all the way back down to its breakout point from the beginning of the year, at about $160.
It is really critical that Ethereum hold here, and begin the task of recovering again. Falling back into the territory of 2018’s bear market would be akin to sliding back into an abyss, which could see the leading altcoin again hit double digits.
Our final analysis for today is Litecoin (LTC), the other leading crypto and Bitcoin’s little sibling. This is another altcoin whose chart has unfortunately been totally thrashed, with a really promising breakout setup blown to smithereens.
Again, like Ethereum, Litecoin rapidly dropped even in Bitcoin-denominated valuation during Bitcoin’s drop. This seemingly counterintuitive move (selling into a falling asset, e.g. Bitcoin) must represent general fear in the altcoin market.
And also like Ethereum’s, Litecoin’s USD chart is a ghoulish horror show after yesterday’s events. After making it up to $145 during the summer, Litecoin is now retesting the limits of its breakout levels from 2019, at about $50. Like Ethereum, if Litecoin gets any lower, it will head back into 2018 territory -- which is as good as unknown territory.
It should be clear that the cryptoasset market is generally at a very critical level across the board. Bitcoin has to pull some of its classic tricks out of its hat in order to reverse this capitulation -- and this is nowhere beyond its capabilities. Indeed, Bitcoin is known (notorious) for this sort of thing.
If it doesn’t, its hard-earned uptrend (earned in the long and painful bear market of 2018) could be scuppered, and the altcoin market could face an unimaginable level of damage -- unless they invert their relationship with Bitcoin out of nowhere.
The views and opinions expressed here do not reflect those of CryptoGlobe.com and do not constitute financial advice. Always do your own research.
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