Bitcoin was unable to capitalize on a temporary rebound following its downward Bart towards the end of last week, leaving bears firmly in control as more downside looks inevitable. This thesis is exacerbated by the potential for a bloody week in traditional markets, thanks to the erosion of confidence following the multi trillion dollar stimulus package that has propped them up for the past month.
Bitcoin’s Mixed Weekend
Bitcoin endured a mixed weekend, with what was looking like a potential reversal to the $7,400 area eviscerated by a sharp rejection at $7,200 and an immediate fall back to $6,540. $6,600-$6,750 is a crucial bearish level, and if Bitcoin can’t rise above it in short order then this is certainly not good news for those in long positions.
In that event, Bitcoin will likely fall further towards $6,200 and potentially further towards the next serious support at $5,860. Breaking that level would almost certainly mean we see $5,400-$5,000 with some bounces in between. If Bitcoin can manage to hold the $6,750 area for a period then there is the potential for a reversal however, as we have seen that Bitcoin is more than capable of reversing its recent trends in a heartbeat.
Markets Could Drag Bitcoin Down
Looking towards the rest of the week, there is the potential for a more bearish scenario on a fundamental side. Some traditional markets, like the S&P 500 to which Bitcoin has been heavily correlated of late, look like they may have run out of steam following the quantitative easing that ushered in a month-long recovery.
If that is the case and they continue down on the highway to Hell then Bitcoin is bound to follow, with the potential for us to revisit the high $3,000s once again.
This scenario is more likely than a continuation of more upside as the impact of the ‘good news’ of the stimulus is overpowered by the alarming news of constantly growing unemployment figures and the lack of economic activity in general. All this points to a potentially bad week in the markets, and thus for Bitcoin.