‘Only Up’ Bitcoin and Ethereum are taking a breather after running into resistance on a tough multi-month down trendline.

On August 15, the price of bitcoin (BTC) and the market as a whole corrected as the S&P 500 and the DOW attempted to gain a foothold after four weeks of strong gains. TradingView and CNBC data show that the Dow is breaking its 200-day moving average for the first time since April 21 and may be a sign for bulls that the market has bottomed out.

Dow Jones Industrial Average (DJI). Source: Trading View
While equity markets have been noticeably bullish amid high inflation and a stable rate hike schedule, a number of traders are concerned that the current 32-day uptrend in the DOW and S&P 500 could lead to a bearish rally.

The release of the Federal Open Market Committee (FOMC) minutes this week (August 17) should provide more information on the Federal Reserve’s current assessment of the US economy and possibly shed light on the scope of the next interest rate hike.

Over the past month, overly optimistic crypto traders on Twitter have also touted a narrative that highlights that Bitcoin, Ether (ETH) and altcoins will sell before the FOMC meetings and then bounce back afterward if the quoted price is in line with the forecast that the number of investors will agree.

Somehow, this short-term momentum also contributes to investor confidence that the Fed will “get through” its monetary policy of raising rates and quantitative tightening after “inflation peaks”. This can be quite a profitable trade for savvy intraday traders, but it’s important to note that inflation is currently at 8.5% and the Fed’s target of 2% is still way off.

Ultimately, the price of bitcoin remains highly correlated with the S&P 500, so investors would be wise to avoid tunnel vision-like narratives in line with their bias and keep an eye on stock market performance.

Bitcoin sells at multi-month trend line resistance
Over the weekend, Bitcoin made a strong move along a multi-month down trend line and broke through $24,000, following a path that many traders expected would trigger an up move and push the VPVR gap towards the $28,000-$29,000 levels.

Trader Chads said that “BTC did look like it was trading last night,” but selling at the resistance level created an “outside bar” where “the previous trend was contested” and according to Chads, this is a sign that this is “might be a trend.” stop and watch for signs of further weakening.”

The “Big Smokey” trader appeared to agree that there could be “strong directional movement” on the horizon, citing the tightening of the Bollinger Bands and separately the Super Guppy indicators as the price of bitcoin broke through the multi-month downtrend line.

On a separate chart, Big Smoky suggested that if the downtrend line is broken, Bitcoin could “see a 26 percent jump to $28,000 before another sideways movement occurs,” eventually leading to a retest at $24,000 dollars.

After hitting similar upper resistance levels, most altcoins have also followed Bitcoin’s lead by posting single digit losses, but those that have flashed bottom signals are still rounding with obvious reversal patterns.

Daily chart of AVAX, FTM and SOL. Source: Trading View
RELATED: Shiba Inu Awaits 50% Rally As SHIB Price Enters Cup And Henkel Breakout Mode

Every dog ​​has his day
Interestingly, popular traders on Crypto Twitter on Sunday (August 14) predicted that the strong rise in meme tokens such as Shiba Inu (SHIB) and Dogecoin (DOGE) is a clear sign that the bullish phase has been overextended and is on its way to correction.

Finally, after gaining 130% and 42.5% in Ethereum and BTC, everyone was ready for some profit taking, especially on resistance. Open interest in both assets remains close to all-time highs, but it is not known what it will take for BTC to trigger a breakout or breakdown of the multi-month downtrendline.

Perhaps a 1% rate hike, tighter cryptocurrency regulations, or an unexpected reversal in the stock markets could bring the price back to a yearly low. Alternatively, a successful Ethereum merger could be a positive catalyst, causing high volume to rise above Bitcoin’s key resistance level.

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Source: CoinTelegraph

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