Crypto

Bitcoin » Bears set a new annual low

Bears position themselves to take advantage of Bitcoin’s new yearly low

Using bitcoin futures, we can see that traders went short just above the yearly low. Now let’s see if it breaks…

It was another bearish session for crypto traders yesterday as the US dollar and yields continued to rise while sentiment on Wall Street and broadly declined. And this caused the price of Bitcoin to reach a key support, also known as the yearly low on the futures charts.

Bitcoin (CME Futures) Daily Chart

Source: Tradingview, Stone X

The daily chart is clearly in a downtrend and yesterday prices broke out of a slight consolidation and reached a predicted bearish target from a bullish wedge pattern. However, what really caught my attention was how volumes surged to a year-to-date low (18,525), suggesting the bears were rushing in in anticipation of a breakout.

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Since the bears have made their intentions clear, this could lead to further selling if prices break through this key support level. However, to counter this, if we see a false break and/or reversal to the upside, it could also prompt these preemptive bears to close and create another upside move. In short, volatility is likely to be on the horizon no matter which direction it takes from here.

Keep track of intermarket relations

bitcoin dollar yen yuan

Clearly, a relatively large component of the decline in the price of Bitcoin was also due to the rise in the US dollar. But other factors also come into play. We see that USD/JPY and USD/CNH have a very strong (inverse) correlation with Bitcoin since the beginning of August, when each upside breakout of these pairs is usually accompanied by a fall in Bitcoin. at about the same time. Therefore, it is worth keeping a close eye on these markets to assess the likelihood that bitcoin will continue to decline.

Pay close attention to what the Bank of Japan, the finance minister, or the People’s Bank of China say about their currencies.

At the time of writing, USD/JPY is trading above 143 for the first time since 1998 and is trying to rise to 144. USD/CNH has also reached its highest trading level since August 2020 and is currently at the seventh level. bovine month. However, the higher these pairs move, the higher the risk of intervention from the respective central banks.

This week Japan’s finance minister addressed the networks to remind markets that it is undesirable for currency markets to move too fast. Since the BOJ is very similar to a weak currency, this means that the USD/JPY rise should be acceptable if its speed is not too high. Given that the yen has already depreciated about 25% against the US dollar this year and that the finance minister is fidgeting, we may be closer to foreign exchange intervention than some would like to believe.

In addition, the PBOC (People’s Bank of China) announced this week that it will cut the banks’ foreign exchange reserve rate to help reduce the depreciation of their currencies. It is not expected to take effect until September 15, allowing the price of the USD/CNH pair to continue rising.

Bitcoin (futures on CME) 1-hour chart

bitcoin futures cmeSource: Tradingview, Stone X

On the hourly chart, we see that the bears intervened before breaking below 1900 and prices have remained lower so far. There doesn’t seem to be any immediate appetite to break the yearly low with nearly non-existent volume, so the longer this key level holds, the more likely it is in favor of a higher correction.

As such, I suspect that any low volatility pullbacks to 1900/a little higher resistance zone could trigger new shorts. At this point, we might be looking for evidence of a lower high for a potential sip trade. A break below yesterday’s lows focuses attention at $1,800, while a break shifts our focus to the December 2021 low near $17,575.

Matt Simpson, FOREX.com » Official site

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Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell foreign exchange contracts, CFDs and cryptocurrencies. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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