The strength of the US dollar continues to weigh on risk assets, but that did not stop Bitcoin and some altcoins from posting strong gains this week.
The S&P 500 index is down about 5% this week, while the Nasdaq Composite is down more than 5.5%. Investors fear aggressive rate hikes by the Federal Reserve could trigger an economic downturn. The yield curve between two-year and 10-year Treasuries, closely watched by analysts for predicting a recession, has inverted the most since 2000.
Amidst all the chaos, it is encouraging to see that Bitcoin (BTC) has outperformed both major indices and is down less than 4% for the week. Could this be a sign that the bottom of Bitcoin may be near?
On-chain data shows that the amount of Bitcoin supply held by losing long-term holders reached around 30%, which is 2-5% below the level that coincided with Bitcoin’s low in March 2020 and December 2018. This metric suggests that Bitcoin could have more room to fall before bottoming out.
Let’s study the charts of the S&P 500 Index, the US Dollar Index (DXY) and major cryptocurrencies to determine if the trend will continue or if a reversal is likely.
The S&P 500 Index (SPX) broke below the 3900 support on Sep 16 and the bears successfully defended the level on retests on Sep 17 and 21. Therefore, this becomes an important level to watch as a break above 3900 will be the first sign that the bulls are back.
The downward sloping 20-day exponential moving average (3920) indicates an advantage for the bears, but the RSI in the oversold territory suggests that the index may attempt a bounce from the strong support zone between 3715 and 3636.
A weak bounce off this zone will indicate a lack of aggressive buying by the bulls. That could raise the possibility of a drop below June’s crucial low of 3,636. If this support collapses, the index could drop towards 3325.
Conversely, a strong bounce off the support zone could result in a rally to 3,900. A break above this resistance could signal a possible short-term trend change.
The US dollar index (DXY) has been in a strong upward trend for the past few months. Each dip is aggressively bought and the index continues to scale new heights. Attempts by the bears to force a change in trend failed as the price rebounded from the 50-day simple moving average ($108) on Sept. 13.
After remaining in a tight range for a few days, the index reached a new 52-week high on September 21. This resumed the uptrend and the index could attempt a rally to 115.
The strong rally of the past few days has pushed the RSI into the overbought zone, which suggests that a minor consolidation or correction is possible in the coming days.
The 20-day EMA (109) is an important support to watch on the downside because a break below it could sink the price down to the 50-day SMA. The bears will have to pull the price below 107 to signal a possible short-term trend reversal.
The buyers have been buying the dip below $18,626 in Bitcoin, but the failure of the price to break above the 20-day EMA ($19,841) shows that the bears are in no mood to let go of their advantage. . This raises the possibility of a retest of the vital June low at $17.622.
A breakout and close below $17,622 could trigger panic and the BTC/USDT pair could plummet to the next major support at $14,500.
While the falling moving averages indicate an advantage for the bears, the positive divergence on the RSI suggests that the selling pressure might be easing. This view could strengthen if the bulls push and sustain the price above the 20-day EMA.
That could push the price towards the upper resistance zone between the 50-day SMA (21,200) and $22,799. Such a move will suggest that the pair can continue its bottom formation within the wide range between $17.622 and $25.211 for a longer time.
Ether (ETH) has been trading inside a descending channel pattern for the past few days. In a channel, traders typically buy near support and sell near resistance.
The bears attempted to sink the price below the channel on Sep 21, but the bulls successfully defended the level. The bulls will try to push the price to the 20-day EMA ($1,467), where they may face stiff resistance from the bears.
If the price turns down from the current level or the 20 day EMA, it will suggest that the sentiment remains negative and traders are selling every minor rally. Afterwards, the bears will again try to push the price below the channel and challenge the psychological support at $1,000.
Conversely, if the price breaks above the 20-day EMA, the pair could reach the resistance line of the channel. A breakout and close above the channel could suggest a possible change in trend.
Binance Coin (BNB) has been trading between the 20-day EMA ($276) and $258 for the past few days. This shows that the bulls are defending the immediate support at $258, but have failed to push the price above the 20-day EMA.
This narrow range trading is unlikely to continue for long. If the buyers push the price above the 20-day EMA, the BNB/USDT pair could rally to the resistance line of the descending channel. The bulls will have to get around this hurdle to hint that the corrective phase may be over. The pair could then attempt a rally to $338.
If the price turns down from the current level or the resistance line of the channel, the bears will once again try to sink the pair below $258. If they manage to do that, the pair could drop to the support line.
XRP broke through the overhead resistance of $0.41 on Sept. 20. The bears tried to catch the aggressive bulls on Sept. 21, but the buyers had other plans. They bought the dip with vigor and pushed the price above the overhead resistance on 22nd Sep.
The pattern target for the breakout of the $0.30-$0.41 range was $0.52 and the same was reached on Sept. 23. This strong move pushed the RSI into overbought territory, suggesting a minor correction or short-term consolidation. The long wick on the September 23 candle shows profit booking at higher levels.
Typically, after a range breakout, price tends to retest the breakout level. In this case, the price could drop to $0.41. If the bulls turn this level into support, XRP/USDT will try to resume the up move. If the price breaks above $0.56, the next stop could be $0.66. On the other hand, a break below $0.41 could suggest that the recent breakout was a bear trap.
Cardano (ADA) bounced off the uptrend line on Sept. 22, indicating that the bulls are vigorously defending this level. The price reached close to the downtrend line on Sep 23, but the long wick of the candlestick shows that the bears are active at higher levels.
The 20-day EMA ($0.46) has started to turn down and the RSI is just below the midpoint, which indicates a minor advantage for the bears. If the price continues down and breaks below the uptrend line, the ADA/USDT pair could drop to $0.40. This is an important level for the bulls to defend because a break below could resume the downtrend.
If the bulls want to gain the upper hand, they will have to push and sustain the price above the downtrend line. Then, the pair could rally to $0.60, where the bears can once again mount a strong resistance.
Solana (SOL) has been squeezed between the 20-day EMA ($33) and the immediate support at $30. This indicates a balanced state between buyers and sellers.
This uncertainty is unlikely to continue for long. The bears will try to take control by pulling the price below $30. If that happens, the SOL/USDT pair could drop to the strong support at $26. The bulls are expected to defend this level aggressively because if this support breaks, the SOL/USDT pair could witness panic selling and drop to $20.
To invalidate this short-term negative view, the buyers will have to push the price above the moving averages and the overhead resistance at $39. If successful, the pair could rally to $48.
The buyers bought the dip below the immediate support on Sep 21, but are struggling to keep Dogecoin (DOGE) above the 20-day EMA ($0.06) on Sep 23. This suggests that the bears continue to sell on rallies.
The bears will try to increase their advantage by sinking the price below the immediate support near $0.06. If they do that, the DOGE/USDT pair could extend its decline to the June low of $0.05. This is a critical level because a break below it could signal the start of the next leg of the downtrend.
Conversely, if the price sustains above the 20-day EMA, the pair could rally to the 50-day SMA ($0.07). If the bulls break through this resistance, the pair could rally towards $0.09.
The buyers successfully defended the critical $6 support on Sept. 2. 21 and 22, but the shallow rebound suggests demand dries up at higher levels. The longer Polkadot (DOT) trades below the 20-day EMA (6.87), the greater the chance of a break below $6.
If the bears sink and sustain the price below $6, the selling momentum could increase and the DOT/USDT pair could resume its downtrend. The next big support on the downside is at $4.
Alternatively, if the price bounces off $6 or rises sharply after breaking below support, it will suggest that the bulls are continuing to buy lower levels. The bulls will have to push the price above the moving averages to clear the way for a possible move higher to $10, which again is likely to act as a barrier.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
Market data is provided by the exchange HitBTC .