- Bitcoin has dropped into a $5,000 channel since early September
- The situation is reminiscent of the July ranging
- Where it exits the range will be crucial to the rest of the year
Bitcoin has been stuck in a tight $5,000 channel for the past 20 days and looks like it will end the month in it, bringing with it reminders of May-June’s performance. Whether it exits the range through resistance or support could have a huge impact on Bitcoin’s performance in the last quarter of the year, so it’s worth paying attention to the current state of play.
China News Sent Bitcoin Into Range
Bitcoin dropped into the current range 10 days ago on the fears over the Evergrande debt mountain and it has been unable to get out of it ever since:
As we can clearly see, Bitcoin is currently bouncing between $40,000 and $45,000 with no clear indication of whether it will break up or down when it finally does. The situation is reminiscent of May and June when Bitcoin spent weeks bouncing between $31,000 and $41,000 before finally breaking up, although three months later and we are almost back at the breakout point.
Zooming out we can see the importance of the two bands. The upper band of resistance represents support going back to early September:
If Bitcoin can breach this level and turn it into support again then it sets Bitcoin up for a profitable Q4. On the flip side, a fall through support could precipitate a swift drop back to the $29,000 level that was tested back in later July:
This is clearly not an area we want to be retesting again as it will show real weakness in the market.
Weekly Chart Offers Hope
While we don’t know how the current range will play out, we can get some guidance from the weekly chart:
Here we can see a textbook resistance/support flip since July, with the $40,000 level acting as a shelf on which Bitcoin is perfectly placed to kick on again and take out the $65,000 highs in 2022. We can clearly see the importance of that level here, as falling through has the potential to act as a lower high and a lower low, spelling bad news for all those who still believe we are in a bull market.