Bitcoin woke up on the wrong side of the bed this morning

It feels like a broad risk-off tone has settled over the market this morning as evidenced by major benchmark equity indices CFD falling into the red and the dollar firmer. As of writing BTCUSD is down over 9%, erasing over $150 billion from the market cap of the entire cryptocurrency market.

This sell-off comes after a euphoric rally last week to an all-time high of $42 000. Various reasons for the sell-off are circulating around the market, ranging from profit-taking, to large Bitcoin whales dumping size into thinner liquidity, Regulatory risks, dollar strength and its high correlation to equity markets. If one can stomach the volatility that comes with the digital currency, you could be set for larger gains as the expected returns relative to other asset classes compensate for the higher risk. For example BTC traded in a range of $33 676 – $38 217 in the last 24 hours. Additional volatility invariably does present one with trading opportunities, but also increased risk if positions are managed poorly. Mentions on Twitter are at all-time highs which is always a good barometer of trading activity and volume. 

JPMorgan recently slapped a $146 000 price tag on Bitcoin for the longer term, competing with gold as an alternative currency. They noted volatility would have to fall substantially for this to play out. It is definitely gaining traction amongst the institutional investing community as seen by the flows into Grayscale’s Bitcoin Trust, roughly $3 billion since mid-October.

On the technical front BTCUSD came right down to its 21-day EMA (pale pink line), that also coincides with support (dotted white line) 32 600 region. The RSI as we can see was really overbought and has now swiftly moved lower to 61.82. As long as that 21-day EMA and support around 32 600 holds then the bullish trend remains intact. However, if these are both breached on a closing basis we could see selling pressure gather pace. The next level to watch below 32 600 would be 30 000 the support for that price point can be seen better on a 4-hour time frame. The above chart is a daily.