I had planned to write about the three levels of BTC support today, but the market had other ideas

By now you are no doubt aware that BTC went for a little skydive today and hit the mid $5000s, instantly removing one of my support levels.

This is interesting, especially because there is no apparent reason for it. The biggest news in crypto today (in my opinion) is that BCH is still somewhat unclear of its future with the fork only a day away and that a Google crypto social media account got hacked by scammers. Neither of these news items should cause a crash, but people are strange creatures when they are scared, and a herd (such as humanity) scares easily. Psychology aside, let's look at the support levels anyway and then spitball a few thoughts.

Three levels of BTC support - make that two levels

Support! support! support!

BTC had three (major) levels of support which it was relying on. These levels are important and breaking any of them is significant.

Level 1 - the higher lows

In this post (not necessary to read it) of 11 November (and a few others) I indicated the "higher lows" support. This support line was created by successively higher low prices as BTC went through its up / down cycles. The bottom leg of the open triangle in the picture below indicates where the limits of this support line were: (you can ignore the red arrow)

That line has now been broken, rather conclusively.

It is no longer an active support base for BTC, nor will it be once BTC rises back above it. A similar support line will need to be reestablished at a new level.

Level 2 - the market cycle lows

This is the support level that caught today's fall.

It's a longer-term level, roughly a year old, that acts as the base or lowest points of the current market cycle.

Depending on exactly which low points in the troughs you wish to use, and which exchange you are using; this level is located in the mid $5000s. I have often referred to a level of around $5750 throughout the year, but today's dip probably went a bit beyond that, digging to the very bottom of the support line (which is not as absolutely rigid and immovable as we would like it to be) at a level of around $5400. It was first formed in October 2017. Scarily this level is being tested as I type...

Should BTC break through support level 2 conclusively, then the often spoken of "capitulation" may well become a reality. This would be a feather in the cap of many analysts who have been calling it for several months. Personally I have been dead against it, seeing no reason for it to occur (and several why it should not). I still see no reason for it to occur, but if it does then those other analysts may well get the sub-$5000 prices they have been predicting. I have always called those price predictions insane, and I still do, but this is crypto and crypto is a very strange animal. Feel free to heap "I told you so" sayings upon my head if that does happen, I'm sticking to my guns and saying that it can't happen. Having said that, I won't be sleeping very soundly tonight!

Level 3 - the long-term lows

In my post of 12 November, I published my latest thoughts on BTC in the long-term. Those thoughts are still perfectly applicable (I won't be worrying about them when I'm trying to sleep tonight! 😀). The chart I drew to illustrate long-term BTC, and more importantly the long-term BTC support line, is this chart:

I regard that red line as a bottom for BTC, a very firm bottom based on the growth of the emerging technology of blockchains. All today's dip has done in my eyes is to bring us even closer to the upwards turning part of that chart, the point where BTC price movement must become positive again.

I'm confused, but not as confused as the market is

As I said earlier, I see no concrete reason for the drop today. The obvious suspect can (and always should be) manipulation. I have been saying for the last year that institutional money is already in crypto, it can do this if it chooses (for reasons I have already discussed and linked to ad nauseam - drop me a comment if you need help with that). Yesterday's post of mine would give a clue as to why they might be doing that: https://mentormarket.io/cryptocurrency/@bitbrain/analysis-of-an-analysis-the-imf-trying-to-stop-the-marshall-islands-from-adopting-cryptocurrencies. I won't delve deeper into this now, I wish to write more on that topic tomorrow, interesting developments have surfaced since I wrote that post two days ago.

For the most part traders are just running around like chickens with their heads chopped off. Both BTC Longs AND Shorts shot up today!

Gold is up too:

Interestingly gold is looking increasingly similar to BTC Longs - lending ever more support to the "BTC is digital gold" theory.

The Dow and the S&P 500 have also had a pretty bad day today.

So markets are all over the show. It's possible that traders have pulled money from "risky" crypto assets due to their perceived risk as they seek to plug holes in their stock market trading strategies. (This does sometimes happen when the Dow, S&P etc dip.) It's a silly move in the long-term (again - Digital GOLD!), but a typically human instinctive reaction.

Conclusion

I don't know what will happen next. I strongly suspect that Level 2 will hold and that BTC will get back to something resembling normal (in crypto terms) over the remainder of the week. I am still bullish about BTC for the end of the year, but I must admit that my end year price predictions of $25000 are looking increasingly unlikely. Still, this IS crypto, I know full well how fast things can turn around and how fast they can rocket up in price, so I'm not discarding my price prediction just yet!

Now if only I had fiat I would be placing buy orders left, right and centre!

Remember to trade with your heads and not with your hearts! And always DYOR!

Yours in undervalued crypto,
Bit Brain

All charts Made by Bit Brain with TradingView

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by Bit Brain

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