Price analysis as Bitcoin breaks major support

Trading
September 27, 2019

Fundamentals

Besides the red-coloured price charts that highlighted poor performance of Bitcoin and other altcoins in the past few weeks, the world’s biggest digital coin hasn’t been supported by news and fundamental developments either.

The much-anticipated Bakkt platform, operated by the Intercontinental Exchange (ICE), launched physically-settled bitcoin futures trading on September 23. The ICE is the parent company of the New York Stock Exchange (NYSE).

“On the first day of trading on ICE Futures U.S., there was strong industry participation in Bakkt Bitcoin Futures and the [October 2019] monthly contract had the tightest bid-offer spreads in the market, which was an exciting achievement. As the only end-to-end regulated market for digital assets, Bakkt Bitcoin Futures will play a key role in bringing greater price discovery and risk management to the Bitcoin market,” said the spokesperson of Bakkt.

Although the Bakkt platform launch is seen as a positive development for the long-term future of bitcoin, it’s first week got off to a slow start with the number of contracts traded on the platform below expectations. Bitcoin dropped almost $2,000 since the launch of Bakkt.

Technicals

In our previous Bitcoin price analysis blog post two weeks ago, we highlighted the major importance of the bull/bear trend line (the red ascending line). Since then Bitcoin has broken below this trend line to a break below two important horizontal supports (two purple horizontal lines on the Bitcoin price chart below).

"Similar losses have been recorded by all the main altcoins. The loss of value is certainly as a result of the overall global market negativity, but the change in the structure of the market with the launch of the bitcoin futures on Bakkt is thought, by a number of traders, to have been a contributing factor," said Marcus Swanepoel, the chief executive of Luno, in a note to traders.


BTC/USD weekly chart (TradingView)
BTC/USD weekly chart (TradingView)

The decline has stopped at 100 WMA that currently comes in at $7,228. Given the importance of this moving average on a weekly chart, we can expect that significant support is to be provided to the bulls in this region. 


BTC/USD weekly chart (TradingView)
BTC/USD weekly chart (TradingView)


The million dollar question is - where do we go from here? As seen the Bitcoin price chart above, the price has broken below the 200 DMA on the daily chart. When coupled with the horizontal resistance (the lower purple line), these two now create a confluence of resistance for the Bitcoin bulls. 

Any significant recovery will depend on the ability of the bulls to move clearly above this zone around $8,300.

On the downside, two very important support zones are awaiting to play their part. Another important horizontal support (the horizontal green line) and the key 61.8% Fibonacci retracement level are filling in the resistance zone of $7,200 - $7,400. If Bitcoin continues to move lower, we can expect this zone to play an important role. However, Bitcoin bears must clear the 100 WMA first, which sits just above the $7,700 mark.

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