The market so far looks as it is trying to form some type of base.
The Bitcoin market rallied on Tuesday, something that it has been struggling to do over the last several sessions. Now that we are above the 50-day EMA, it is likely that we could go looking towards the top of the overall consolidation. This sets up a move all the way to the $45,000 level, and by extension, the 200-day EMA.
If we can break above all that, then the market could be one that goes higher over the longer term. I think at this point, Bitcoin is still consolidating, so it will be interesting to see whether or not that can continue to be the case. If it is, we will see selling pressure rather quickly. Signs of exhaustion will be jumped upon and could send the Bitcoin market down to the 50-day EMA. The $40,000 level is sitting just below there and is a bit of a “fair price level” for the market.
If we were to break down below the $40,000 level, then it is likely that we could go looking towards the $35,000 level underneath. That is the bottom of the overall consolidation area, and I think it attracts a certain amount of attention. If we were to break down below there, it could open up the trapdoor to much lower prices. At that point, we could enter a nosedive towards the $30,000 level, and then possibly even much lower than that.
I think the only thing you can count on is a lot of noisy trading, so you probably need to be cautious about your overall position size, and of course how much you are willing to risk of your account. The market will continue to be very noisy, but I think eventually we will break out of this rectangle that I have drawn on the chart. Once we do, that gives us a lot more in the way of clarity going forward.
Monetary policy is going to be important to pay attention to, as the monetary policy coming out of the Federal Reserve can have a massive influence on risk appetite. Keep in mind that Bitcoin is far out on the risk spectrum, so we need to see more of a “risk-on environment” overall. The market so far looks as it is trying to form some type of base.