Bitcoin and some altcoins have fallen to critical support levels, and the upside strength is insufficient, raising the risk of further falls.
After several days of trading at around $20,000, Bitcoin (BTC) dropped sharply, dropping below $19,000 on September 6. The decline was not limited to the cryptocurrency markets, as US stock markets also closed lower on September 6.
Risk assets have come under selling pressure in recent days as investors feared the Fed could continue its aggressive tightening policy.
The CME FedWatch tool shows that the probability of a 75 basis point rate hike at the September meeting rose to 80% from 69% a week ago. This extended the rise of the US dollar index (DXY), which closed above 110 on September 6.
The U.S. equity and cryptocurrency markets are trying to recover on September 7, but the recovery is unlikely to continue until the DXY shows signs of a top.
Daily dynamics of the cryptocurrency market. Source: Coin360
While the bear market has been brutal, it is an encouraging sign that venture capital firms continue to pour money into crypto and blockchain companies. According to a KPMG report published on September 6, these companies’ total investment in the first half of 2022 was $14.2 billion, following a record investment of $32.1 billion in 2021.
What are the critical overhead resistances in bitcoin and altcoins that need to be overcome in order to gain bullish momentum? Let’s examine the charts of the top 10 cryptocurrencies to find out.
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Tight bitcoin trading between $19,520 and $20,576 ended with a fall on September 6th. The bears pulled the price into a strong support zone between $18,910 and $18,626.
BTC/USDT daily chart. Source: Trading View
If the price recovers outside the zone, BTC/USDT could rise 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 down to key support at $17,622. A break and close below this level could signal a resumption of the downtrend. The declining 20-day exponential moving average (EMA) ($20,427) and relative strength index (RSI) near the oversold area suggest that the bears are in control.
The first sign of strength will be a break and close above the 20-day EMA. Such a movement suggests that the bulls are trying to recoup.
Ether (ETH) rose above its moving averages on September 6, but the bulls failed to break the upper barrier at $1,700. The bears sold aggressively and brought the price back below the 20-day EMA ($1,597).
Daily ETH/USDT chart. Source: Trading View
The bears will try to consolidate the advantage and push the price below the neckline of the head and shoulders (H&S) pattern. If they succeed, ETH/USDT could drop to $1422 and then to key support at $1280. The target of this bearish setup is $1,050.
On the other hand, when the price bounces off the neck line, it shows that the bulls continue to view dips as buying opportunities. The pair may then consolidate between the neck line and $1,700 for a while. A break and close above $1,700 could pave the way for a possible rally to $2,030.
BNB reversed sharply from the 20-day EMA ($282) on September 6 and fell below critical support at $275. This completed the bearish H&S pattern.
BNB/USDT daily chart. Source: Trading View
As a rule, after the breakdown of key support, the price returns to retest the level. In this case, buyers will try to push the price back above $275. If they succeed, several aggressive bears may be trapped. This could lead to a short squeeze and the BNB/USDT pair could rise 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 see a drop to $240 and if that support also gives way, the next stop could be a pattern target at $212.