- Bitcoin has enjoyed a great October, but after five days of green a reversal is imminent
- Bulls hope Bitcoin will hold above the recently-vaulted resistance line
- A crashing dollar will help Bitcoin’s cause in the coming weeks and months
Bitcoin has enjoyed a great start to October, erasing many of the losses suffered last month, but after five consecutive days of green candles a selloff is anticipated, with the level at which it bounces being potentially crucial with regard to further moves northward.
Bitcoin Looking to Turn Resistance Into Support
Bitcoin has overcome two lines of resistances already this month, leading to five consecutive days of positive price action:
While this is undoubtedly bullish in principle, the positive momentum has started to flatten out, suggesting that we can expect a retracement in the near future. Bitcoin typically never enjoys more than 2-3 consecutive green days without experiencing some red, so we need to look at the levels that need to hold in order to remain bullish.
If Bitcoin does retrace as expected, it is important that it doesn’t close underneath the trendline that it set in mid-August:
Should it fail to flip this resistance into support it would suggest that Bitcoin is not ready to tackle the $12,000 barrier that has twice this year proved to be unsurpassable and we can expect a retest of the low to mid-$10,000s.
If we did follow this path, the next crucial level would be the support that formed with the March collapse and has been rigidly followed since:
As long as Bitcoin remains above this level we can consider that overall the sentiment is bullish. Therefore, a daily close underneath $10,850 is what we would be looking for in order to keep this intact.
Wider Narrative is Bullish
In a wider context, it has to be said that the Bitcoin narrative is certainly in a strong position right now. We can point to the recovery since March to back this up in a historical sense, but looking forward we can see that the U.S. Dollar Index has suffered hugely following discussions over another multi-trillion dollar coronavirus stimulus bailout which would further weaken the currency’s value:
Following weeks bouncing around at short term support the DXY broke out at the end of September and looked set to continue, but it has failed spectacularly and collapsed right back into this support area.
This weakness is great news for Bitcoin, gold, and silver and may ensure that these assets enjoy a great Q4 as the dollar gets further debased thanks to more money printing.
