Technical analysis

Bitcoin: Just a technical bounce before new lows?

Julien Moretto – 25 Mar 2020

It’s an indecisive and volatile market that investors are facing this week. The price of Bitcoin has settled since March 19 in a wide range between €5,600 and €6,400 ($6,000 and $7,000). It was trading around €6,400 ($6,900) on the morning of March 25 and has bounced by almost 30% over the past week.

Uncertainty related to the Covid-19 epidemic continues to dominate the debates, making the markets very nervous. The entire crypto market, with rare exceptions, is correlated to Bitcoin. On the other hand, since March 19, there has been a slight decorrelation between Bitcoin and stock indexes, although stocks are also rebounding since the beginning of the week. However, this recovery could only be due to the government stimulus packages and massive liquidity injections from central banks around the world.

While the epidemic could soon spread more strongly in the United States, caution should be exercised concerning new repercussions on the economy and therefore the markets. More than ever, it is important to adopt a so-called defensive management of your capital and a progressive and planned investment strategy if you wish to make purchases in such a context. Let’s take a look at the different key levels on cryptocurrencies, which are likely to trigger the next mid-term directional movements.

  • According to CoinGecko, market capitalization is up to $188 billion, up from $150 billion seven days ago.
  • Market correlation remains strong, with Bitcoin’s dominance rising slightly to 66.5% from 64.6% last week.
  • Dash offers the best bounce of the week in the top 20 with + 50%.
  • Bitcoin’s correlation index with the S&P 500 is at its highest level. The liquidity crisis is the cause. Everybody wants the dollar. For the moment…

Bitcoin (BTC)

Coinhouse’s Recommendation : 
Wait

  • The price of Bitcoin oscillates in a wide range between €5,600 and 6,500€ ($6,000 and $7,000). In recent days, it seems to be stabilising below the $7000 level. A consolidation that could give way to another bullish move in the coming days. However, the uncertainty is at such a level at the moment that sharp movements can occur both up and down.
  • A first bearish scenario is possible. This bounce would only be technical following the sharp drop at the beginning of March. If the price fails in the next few days to cross the €6500 ($7000) level and then falls below the €5400 ($5700) level, then this new directional bearish move will be confirmed. We would be in a long term downtrend that could finally bring the price around €2600 ($3000) according to Fibonacci extension levels calculated from the 2019 high at $13,800.
  • The bullish scenario is as follows: the price breaks up the €6,500 ($7,000) level to move towards the Fibonacci retracement level 0.382 located at €7,000€ ($7,700) to time out and build a longer term uptrend.
  • So we’re still in an indecisive situation. We advise waiting for the break of the $7,000 level before buying or strengthening long positions.

Ethereum (ETH)

Coinhouse’s Recommendation : 
Buy

  • The price of Ethereum (ETH) is less volatile: a 19.2% bounce this week, to regain the €127 ($135) level on March 25.
  • Same potential bearish scenario as Bitcoin: It is not to be excluded that the rebound is only technical and momentary. If the €127 ($135) level acts as a resistance and the decline accelerates again, the final bearish target could be a return of Ethereum’s 2018 lowest price of €72 ($80). Interesting purchases could then be tempted since from a technical point of view, we would be on the formation of a double bottom on the weekly timeframe.
  • The bullish scenario is a continuation of the €127 ($135) level as support. The bullish trend would then continue to gain the pivotal level of €145-€155 ($150-$160) and then build a longer term uptrend. As long as the price stays above the €127 ($135) level, buying can be attempted but be prepared to sell if a bearish breakout occurs.

Litecoin (LTC)

Coinhouse’s Recommendation : 
Wait

  • Litecoin (LTC), is less performant than Bitcoin and Ethereum, and rebounds only 14.7% this week to now trade around €35.70 ($39) on March 25.
  • We are very cautious on Litecoin. The price will first have to break through the €35-€39 ($40-$45) pivot level before we can see any bullish sentiment again. The upward break of this level will be a buy signal.
  • If the downtrend continues, Litecoin is likely to return to its 2018 lowest of around $23. It will then be necessary to observe the general trend of the cryptocurrency market to see if it will be relevant to try to buy at this price level for Litecoin.

Top & flops of the week (top 50 marketcap)


Tops

1- Dash : +46,3%
2- Bitcoin SV (BSV) : +41,7%
3- Maker (MKR) : +29,8%


Flops

1- Stellar (XLM) : +5,9%
2- Lisk (LSK) : +6,2%
3- 0x (ZRX) : +7,6%

Latest crypto news

  • Bitcoin’s correlation index with the S&P 500 is at its highest level.
    It was the liquidity crisis that caused it. Everybody wants the dollar. For the time being. But with infinite injections of liquidities and rates close to zero in the investments offered by the banks, the question will arise as to where to put your money.
    The liquidity crisis will only last for a while. With precise emissions rules that are known in advance, cryptocurrencies will become more attractive. DeFi products already offer better rates than traditional products. 
    With no hurry in the short term, it’s time for positioning.
  • The miners remain “bullish” in general.
    After investing huge sums of money to expand their infrastructures, the recent drop in prices is forcing miners to shut down the least profitable machines. Nevertheless, they are patiently waiting for the halving scheduled for May 2020 to see what impact this will have on prices throughout the year. If the price remains at these levels, we can expect a drop in hashrate during 2020. Miners remain reluctant to sell their bitcoins, some even resorting to loans to pay their daily bills.
  • The whiskey.
    It’s a booming market in the United States. So Wave Financial had the good idea to tokenize a year’s production of a Kentucky Bourbon. In order to bring liquidity and international exposure to this vintage. From 10,000 to 20,000 barrels will be tokenized, worth up to $20 million.
  • Big news for Tezos.
    It’s the end of the lawsuit. As a reminder, plaintiffs had filed a class action suit against the Tezos Foundation following the fundraising and the delay in launching the network due to conflicts with the former director of the Foundation. $25 million. This is what the Foundation will pay to the plaintiffs. That’s exactly what they were looking for, with a complaint that didn’t make much sense. Nevertheless, the Foundation felt it best to turn the page on this chapter, to focus on the future. It still has about $500 million to fund ecosystem development.
  • The BSV blockchain could be subject to a 51% attack.
    Unknown miners have increased their computing capacity significantly recently. They could take control of the entire Blockchain. This news could have very negative consequences on the BSV price.

Investors’ attention is drawn to the fact that the content of the articles does not constitute investment advice.
Investment in cryptocurrencies carries a risk of total capital loss.
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