Bitcoin Dices with Death as Four-year Support Line is Tested

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Bitcoin is hovering just above a four-year trendline that could lead to short term disaster were it to be broken. For the past four years Bitcoin has been respecting a trendline that, if it wants to stay intact, requires a weekly close above $7,650. Falling short of that target, particularly at a time when the rest of the world is braced for further financial turmoil, would spell real trouble for anyone seeking a bull run in 2020.

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Bitcoin Precariously Placed

Bitcoin has already tested the crucial $7,650 level once this week and bounced back, but was swiftly rejected at $8,200 and has dropped back down to remain perilously at $7,800. If we are to accept the bullish argument that Bitcoin is currently ranging on its way to a breakout, we would need to see a bounce back up to the $9,500 region in the coming weeks as it coils further into this pennant:

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Whether this is possible with global market sentiment the way it is might be tall order, but then Bitcoin has already proved that it isn’t necessarily correlated to other markets.

The Crypto Fear and Greed Index is currently sitting at 17, with yesterday’s 16 being the lowest level since December 2019:

Crypto Fear & Greed Index on Feb 21, 2019

This presents another bullish argument, which is that that low of 16 in December preceded a two-month long mini-bull market that saw Bitcoin climb $3,500 to $10,500. This has happened on many occasions, with several drops in the Fear and Greed Index being followed by huge pumps. But then, we weren’t on the verge of financial collapse on those occasions.

The Bearish Alternative Sees $5,000 Beckon

What happens if Bitcoin does close the week under the key $7,650 level? Obviously it will not implode immediately, but it will demonstrate that the market doesn’t believe it is ready for the next cycle. Were that to be the case we need to be wary of the huge open space created by the rapid rise in 2019:

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Not having the sentiment to support the highs created by this run, we will inevitably fall to fill it, with how far down we go depending largely on the levels of faith in markets globally, which in turn will be predicated by the spread of the coronavirus.

Were all markets to disintegrate a la 2008, we could very easily be looking at the $5,000 level, meaning 2020 would act as another recovery period before Bitcoin could potentially try again in 2021.

Naturally, we all hope it won’t come to that, and that Bitcoin is simply ranging before breaking out of the top of the two-year pennant, but there’s no harm in having some stops in place in case the worst happens. If we do see levels of $5,000 this year it could represent the last ever opportunity to get Bitcoin on the cheap.