Bitcoin and some altcoins have fallen to critical support levels and the strength of the upleg is lacking, raising the risk of further declines.
After several days of trading near $20,000, Bitcoin (BTC) sharply reversed and fell below $19,000 on September 6th. The decline wasn’t limited to cryptocurrency markets as US stock markets also closed lower on Sept. 6.
Risk assets have come under selling pressure over the past few days as investors fear the US Federal Reserve could continue its aggressive policy of tightening.
The CME FedWatch tool shows that the probability of a 75 basis point rate hike rose to 80% at the September meeting from 69% a week ago. This continued the rise of the US Dollar Index (DXY), which closed above 110 on September 6th.
The US stock and crypto markets are attempting to rally on September 7th, but the recovery is unlikely to continue until after the DXY shows signs of a spike.
Cryptocurrency market daily indicators. Source: Coin360
Although the bear market has been brutal, this is an encouraging sign that venture capital firms continue to pour money into crypto and blockchain companies. According to a report by KPMG published on Sept. 6, total investments by these companies reached $14.2 billion in the first half of 2022, after a record investment of $32.1 billion in 2021.
What are the critical resistance levels in bitcoin and altcoins that need to be broken for bullish momentum to pick up? Let’s examine the charts of the top 10 cryptocurrencies to find out.
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On September 6th, Bitcoin was trading in a tight range between $19,520 and $20,576. The bears pulled the price towards a strong support zone between $18,910 and $18,626.
BTC/USDT daily chart. Source: Trade View
If the price bounces off the zone, BTC/USDT could surge to the $19,520 breakout level. The bears will try to turn this level into resistance. If successful, the probability of a break below the support zone increases.
This could take the pair to the key support at $17,622. A break and close below this level could signal a resumption of the downtrend. A descending 20-day exponential moving average (EMA) ($20,427) and a relative strength index (RSI) near the oversold territory are suggesting that the bears are in control.
The first sign of strength will be a break and close above the 20-day EMA. Such a move suggests that the bulls are trying to bounce back.
Ether (ETH) rallied above its moving averages on September 6, but the bulls failed to clear the false barrier at $1,700. The bears sold aggressively, bringing the price back below the 20-day EMA ($1,597).
Daily ETH/USDT chart. Source: Trade View
The bears will attempt to consolidate the advantage and sink the price below the neckline of the head and shoulders (H&S) pattern. If they succeed, ETH/USDT could drop to $1422 and then the key support at $1280. The target of this bearish setup is $1,050.
Alternatively, if the price bounces off the neckline, it would mean that the bulls continue to view the downtrend as a buying opportunity. The pair could then consolidate between the neckline and $1,700 for a while. A break and close above $1,700 could open the way for a possible move higher to $2,030.
BNB sharply deviated from the 20-day EMA of $282 on Sep 6, falling below the critical support at $275. This completed the bearish H&S pattern.
BNB/USDT daily chart. Source: Trade View
Typically, after the major support collapses, the price returns to retest the level. In this case, buyers will try to push the price back above $275. If they succeed, some aggressive bears could be caught. This could result in a short squeeze and the BNB/USDT pair could rally to $308.
On the other hand, if the price turns down from $275, it would mean that the bears have turned the level into resistance. This could start dropping to $240 and if that support gives way as well, the next stop could be a pattern target at $212.
The bulls pushed XRP above the upper resistance level at $0.34 on September 6, but the bears are catching aggressive buyers and pushing the price down