After a harsh sell-off that wiped almost $1 trillion in the cryptocurrency market, a new bull run might be in play. Bitcoin fell from its all-time high of $64,700 down to $30,000 signifying a drop of more than 50% after a confluence of events that resulted in investors unwinding their long positions, leveraged traders having margin calls and speculators shorting the crypto. Bitcoin holds the largest market capitalization and is seen as a reference to the performance and health of the cryptocurrency market. Other Alt coins followed Bitcoin in the sell-off.
However, as experienced crypto traders might tell you, these huge swings are very common in this market, so this should not come as a surprise. Back in 2018, BTC lost almost 70% in value after a huge rally in 2017. As an old adage says, past performance is not representative of the future, but we still might expect a similiar rebound in BTC. This stems from several fundamental factors
- Increase use of cryptos (New products, ETFs)
- Hedge against FIAT money inflation
- Central banks maintaining their monetary expansionary policies
- FOMO and BTD factoring in again
- Regulation fears dissapitate (SEC new chairman; Gary Gensler seems determined to support enforcement efforts involving cryptos)
- Factoring in the next halving (2024) in line with its deflationary nature
- Efficient and environmentally friendly mining
From a technical point of view (graph below), the price (currently at $37,800 on 17th June) seems to be range bound between to fibonacci confluence zones ($30,500 and $43,700). It is our view that the price will ping pong around those levels for the rest of the year or until the fundamentals mentioned above turn more BTC friendly. A upside breakout might occur if the price hovers and stays around the green diagonal support line, whilst encroaching the 50% retracement of $37,200. The Moving averages lines (Blue EMA 50, Red EMA 100, Cyan EMA 200) seems to be converging on the price, thus showing that the current price is close, but might not break the exponential price average of the last 50,100,200 days respectively.
Should the price retest and break the $30,500 support level, we might see another sharp fall to 2018 highs of $20,000 (not shown in chart). RSI indicator at 47 complaments the price chart in showing a downtrend and will soon enter the oversold territory when going below 30. This might offer a potential entry point.
Should the price break the vital fibonacci resistance zone of $43,500, the price could retest retest and potentially break the $64,700 price level and reach the next resistance level of $120,000. We are of the opinion that this is highly likely in 2022 as cryptocurrencies become viewed more of a legitimate asset in the Global financial markets.