Bitcoin price is showing weakness after another strong rejection of the USD 11,000 resistance level. As the fourth quarter of Bitcoin (BTC) begins, sentiment in the market generally remains cautious and neutral.
Bitcoin could see another decline in the fourth quarter due to several key factors. For the past three years, every monthly candle has closed red in September. The monthly September candle for 2020 is also on the right track to be in the red, indicating a lack of direction.
From March through August, favorable financial conditions, a low interest rate environment, and a multi-million dollar stimulus package caused Bitcoin and stocks to rebound simultaneously. In the coming months, the US presidential election in November increases the likelihood that approval of the stimulus will be delayed. Growing uncertainty about the macroeconomic outlook and financial markets in the US could put pressure on BTC.
Traders are generally cautious in the short term and optimistic in the medium and long term. Technical analysts have identified Key price levels for BTC such as $ 9,800, $ 10,700, and $ 11,800. As long as Bitcoin stays between $ 9,800 and $ 10,700 or between $ 10,700 and $ 11,800, low volatility is expected. As a result, while traders are cautious about Bitcoin’s near-term trend, many don’t expect a big drop.
As a potential area of interest, traders see the USD 9,600 CME gap that arises when the price of Bitcoin rises or falls below the price of the Bitcoin futures market after closing on weekends or holidays. . The $ 9,600 gap has yet to be closed and given the trend for most of the CME gaps to be closed, the level remains a target.
A short-term declining structure
Bitcoin’s monthly candle is expected to close below USD 11,000, which would confirm a red candle for the month of September. In technical analysis, a new candle that closes below the end of the previous candle is called a “bearish swallow”.
Additionally, Bitcoin’s monthly closing price would come after repeated rejections, as BTC has posted four consecutive lows on the daily chart since August 17th. The formation of a lower high occurs when the last peak is below the previous one. In this case, Bitcoin peaked at $ 12,468, $ 12,050, $ 11,179 and $ 10,950, respectively.
Bitcoin is facing two declining technical patterns and structures on the monthly and daily charts. The two time frames are viewed as high time frame charts in technical analysis, which could increase the likelihood of a short term pullback.
Bitcoin price briefly broke the USD 10,800 resistance level on September 28, but a pseudonymous trader named “Byzantine General” He said that it was most likely a bullish trap. BTC rose to $ 10,950 on major exchanges but “welcomed” the resistance level. When BTC is struggling to break out of an important resistance level cleanly, the likelihood of a “bullish” trap is high.
When $ BTC consolidates just above the support and continues to hug it, it’s almost always a bull trap.
Especially when the consolidation is falling.
When bitcoin erupts, it usually blasts away and doesn’t give anyone a chance to get in. pic.twitter.com/LQZtf6P6lB
– Byzantine General (@ByzGeneral) 29th September 2020
Bitcoin’s recent $ 10,950 decline means denials on the monthly, daily, and hourly timeframes due to the fact that they have cautious / daring structures in the short term. If this coincides with a monthly candle close, it could reinforce a short-term downtrend.
BTC’s historical performance in the fourth quarter
BTC’s historical performance suggests a downtrend as BTC posted declines of 42.46% and 13.59%, respectively, for the last two consecutive quarters.. Given BTC’s tendency to underperform in the final quarter of the past two years, the odds of a slow fourth quarter remain high.
However, After halving in 2016, BTC had a positive fourth quarter, rising from $ 613.98 to $ 998.33. BTC is currently in a halving cycle. If you follow trends from the past, you can see a gradual increase over the next 12 months. In the 2016 halving cycle, it took Bitcoin 15 months to hit a high of $ 20,000, which has remained an all-time high.
An uncertain financial market
Last month, the U.S. stock market continued to decline due to the COVID-19 pandemic. Concerns about a second wave were compounded by a lack of incentives and uncertainties about vaccines. A stimulus package would ease the pressure on the economy and distribute direct checks to individuals, thereby increasing the overall liquidity of the market.
However, Bitcoin, gold, stocks, and high-risk assets are entering the fourth quarter with no incentive and with an increase in COVID-19 cases, and due to the November election, Washington was on stimulus. House Democrats are reported to be preparing a $ 2.4 trillion stimulus proposal with direct payments. It is unknown if it will be approved before the presidential election.
As a result, investor confidence was low in September. According to Bank of America Investors pulled $ 25.8 billion off the stock market last week. This was the biggest weeklong excursion since June 2019, when trade war fears raged. In a note, Bank of America strategists pointed to the lack of clarity of the stimulus as a catalyst for exits, stating: “With increasing fiscal stimulus behind us and with no explicitly cautious monetary policy, given the initial valuations, it is difficult for policy to catalyze a sharp surge in stocks and credit over the next 6 months.“.
Although Bitcoin has become increasingly decoupled from stocks and has a stronger correlation with gold, it is still generally affected by more general financial market sentiment. Speaking to Cointelegraph, Denis Vinokourov, Head of Research at Bequant Exchange, said that macroeconomic and political events have driven cryptocurrencies:
“Macro and political events have become increasingly important drivers of sentiment in all markets, and digital assets are no exception. The uncertainty surrounding the US election is likely to result in great volatility. Risks of contagion are seen as high, but interesting is that the implied volatility for Bitcoin and Ethereum has remained well anchored in the spot markets despite weak price movements. “
On-chain indicators are positive
Since June, on-chain indicators have been pointing continuously to an upward trend for Bitcoin. Various on-chain indicators, ranging from whale activity, HODLing activity, address activity, hash rate, and latent supply, signal a healthy accumulation phase for Bitcoin.
For example, Glassnode CTO Rafael Schultze-Kraft quoted the “Bitcoin Short Term Holder MVRV” to suggest that BTC is at a crucial point. He said that the on-chain indicator suggests a reversal of the trend when it hits 1. The last time it hit 1 was in March when BTC bounced back from a sharp correction of $ 3,600. Kraft said:
“The # Bitcoin STH-MVRV ratio has been above 1 since April. Currently, the support line is being tested at 1 (indicating a trend reversal). Short-term holders are valuing BTC at its realized price. # Bullish while Let’s maintain that level. “
Soona Amhaz, General Partner of Volt Capital, is referenced Bitcoin blockchain address activity signals a healthy mood and indicates significant user growth. In general, Technical structures indicate short-term weakness and a long-term accumulation phase. The uncertainty in the financial markets could add to the selling pressure on BTC for the foreseeable future, but the on-chain metrics show a healthy and gradual growth rate for the network.