What a week for cryptocurrencies and global markets alike. Prices absolutely fell through the roof for every risk-heavy asset. Coronavirus fears have ramped up across the globe, with most major markets taking that as a negative sign for the economy.
It makes sense. Despite our shift from brick-and-mortar to digital commerce, we still rely heavily on physical activity for supply chains to function. With authorities calling for human contact to be reduced, these supply chains have come to a near standstill.
South Asian countries are still functioning, and much better than their Western counterparts, which is ironic considering the virus originated in South-east Asia.
Cryptocurrency has proven itself as a risky investment in the last few days. When it mattered the most, the safe haven narrative collapsed, exposing Bitcoin as a risky asset that most see as a speculative investment. This isn’t a bad thing, but we should learn to accept reality and not let our emotions cling to narratives.
Once again, we are entering a stage where BTC price action is the only thing that matters in the crypto market. Move your focus away from altcoins and look at BTC for a clear picture of what’s going to happen to the market as a whole:
On higher timeframes, Bitcoin looks primed to trade within a descending channel if it doesn’t break the range low it set at $3,850. It’s impossible to understand where we’ll go based on longer time frames, so let’s look at the hourly chart to understand short-term directional possibilities.
Before that, take a look at the volume on the last weekly candle that closed. Insane. That is incredibly bearish, and so a break of our 2019 lows at $3,120 shouldn’t surprise you. But it shouldn’t scare you either.
Based on what we’re seeing on shorter time frames, we witnessed a swing failure pattern a few hours ago as BTC went for the $6,000 range high and missed it by just $10.
This is a bearish signal, and the Bitcoin price has dropped since then. The level near the $4,600s should hold if there’s a bullish re-test. Breaking this would be catastrophic and lead to consolidation inside or below $3,000.
Shorter time frames offer more insight than higher time frames in these trying times.
Like we said, altcoins don’t really matter. However, ETH is the king of altcoins, so it’s always worth a look in order to gauge general sentiment. Another scary weekly candle volume on the decline here, but this is something we expected.
If you’ve been reading these market updates for a while now, our focus on volume might have baffled you. Now you know why we kept calling the run-up fishy when it never had that explosive volume Bitcoin is known for.
ETH has rebounded off a strong monthly support. But we think sub-$100 consolidation is definitely on the cards here.
Perspective is everything. Don’t get flustered over this, because it’s happening to every investor across the world. Learn to be diligent. Take this as a learning exercise against over-allocation to risk assets.
Shorter time frame charting will make the next few days of price action clearer. We still need a few weekly candles before we can analyze this drop from a systemic angle and understand why this happened and what’s next.