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Chart Of The Day: Bitcoin Eyeing $30K, Possibly Even Lower

By Investing.com (Pinchas Cohen/Investing.com)CryptocurrencyJan 06, 2022 09:41AM ET
www.investing.com/analysis/chart-of-the-day-bitcoin-eyeing-30k-possibly-even-lower-200613853
Chart Of The Day: Bitcoin Eyeing $30K, Possibly Even Lower
By Investing.com (Pinchas Cohen/Investing.com)   |  Jan 06, 2022 09:41AM ET
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Yesterday's publication of the FOMC minutes from the Fed's December meeting revealed that Federal Reserve policymakers are further along on the path to higher interest rates than investors realized.

After the release, traders and investors cashed out of a wide range of asset classes including formerly high-flying technology stocks. Even Treasuries were of no use to anyone looking for a safe haven, current yields pale in comparison to the expected higher interest rates.

Therefore, sovereign bond issues with lower maturity dates outperformed among Treasuries, since the short-dated bonds wouldn't lock traders into a lower payout schedule. The US dollar, which should be the immediate beneficiary of higher rates, remained flat. Investors are also betting on the ECB tightening policy shortly.

The outlook for higher interest rates didn't even boost Bitcoin which some have been touting as the new safe haven, potentially replacing gold's status in that position.

But the cryptocurrency doesn't provide a payout. As such, Bitcoin was lumped in with non-yielding gold during the selloff.

Unappealing fundamentals notwithstanding, Bitcoin's decline comes at a technical juncture that could be equally ugly.

BTC/USD Daily
BTC/USD Daily

The number one crypto token by market cap extended a downside breakout of a massive H&S (head and shoulders) top, a pattern named for its shape, which tracks a reversal in the trend based on the price highs and lows.

When prices fall below the neckline, the trendline that connects the recent lows of a sideways move is an ideal showcase for how supply is gaining on demand. With more sellers than buyers, traders expect the momentum to resume in the same direction, in this case lower.

Other clues to a reversal: the price fell through 200 DMA support shortly after the 50 DMA cut through the 100 DMA. If the 50 DMA fails to find support above the 200 DMA, it will trigger a Death Cross, a highly negative term even fundamental analysis purists are familiar with.

Notice, however, that there have been fake-outs along the way. Savvy traders would employ filters to lower the odds of a bear trap. A close below the $42,000 level will increase the chances of another bearish move, while a close below $40,000 will reinforce bearish entrenchment.

The H&S's implied target puts Bitcoin on track for another technical milestone.

BTC/USD Weekly
BTC/USD Weekly

If the price falls below $29,000, it will have completed a mega double-top. If that follows through, believe it or not, Bitcoin will be on a path toward $0.

Trading Strategies

Conservative traders should wait for the price to close below $39,600, then wait for a return-move to retest the pattern's integrity before risking a short position.

Moderate traders would wait for the price to close below $42,000 and then wait for a corrective rally to demonstrate resistance before committing to a short sale.

Aggressive traders could enter a contrarian, long position, counting on a bounce as the price nears the previous low of Dec. 4 at $42,101. This is a risky position, but aggressive, savvy traders who know how to manage risk might take advantage of a dip that nears support, a pretext for a return move.

Trade Sample - Contrarian, Aggressive Long Position

  • Entry: $42,500
  • Stop-Loss: $42,000
  • Risk: $500
  • Target: $45,000
  • Reward; $2,500
  • Risk-Reward Ratio: 1:5
Chart Of The Day: Bitcoin Eyeing $30K, Possibly Even Lower
 

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Chart Of The Day: Bitcoin Eyeing $30K, Possibly Even Lower

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Comments (4)
Shane Zhang
Shane Zhang Jan 08, 2022 10:23AM ET
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We have seen so many session in the past 3 years where we see both USDJPY and Gold rally.  Can you explain why?  My view is people loss faith in currency after endless round of money printing by central bank.  Soon or later USD may fall like a rock, as world no longer believe US government have the ability to repay that tri of debt.  That is why I heard lot of gold bull think 6000 is our target.
john Rivera
john Rivera Jan 06, 2022 3:12PM ET
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gaving away bitcoin
Lino Miranda
Lino Miranda Jan 06, 2022 1:05PM ET
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Btc can never be zero because many bitcoins have been lost.
morgan Kate
morgan Kate Jan 06, 2022 8:39AM ET
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