“Bitcoin fell 8.7% on Wednesday – just as it neared its highest-ever price – passing $19,000 (£14,241) for the first time since its 2017 collapse. It was joined by other cryptocurrencies in the drop, all of which had been buoyed in recent weeks by strong demand from institutional investors.” (SKY NEWS) Bitcoin has just seen a big correction will it recover or are is this the start of a major correction?
Our view is looking at past corrections it could fall a lot further. In terms of Bitcoin it’s still up over 100% this year and before the correction got close to its all-time high of $19,666. Speculators have bought it for the following reasons:
At present we have a demand for riskier assets with higher returns, Bitcoin is also seen as a hedge against inflation, and USD weakness. Finally, many traders think cryptocurrencies will win mainstream acceptance. Before the big fall many investors simply bought on fear of missing out on the big move and the Bitcoin Greed Fear Indicator was at an extreme 93% before the crash.
In terms of going forward we think we will see more weakness due to the odds of a USD rally in our view are high – on the chart below you can Bitcoin and the US Dollar index divergence. We don’t think risk on will continue which is another bearish factor and Finally, we don’t think it will get mainstream acceptance and institutional interest in it is minor. If we also look at the volumes in bitcoin there far smaller than in gold which is another hedge against USD weakness and inflation.
Regarding our vision, we see a bitcoin sale (chart below) on key historical drawdowns data levels and the correlation Bitcoin USA.
26/11 BITCOIN DAILY CHART: Bitcoin has rallied off its low, but upside is limited in our view – we are trading back above the 20 Day MA. In terms of trading short a move back below the 20-day MA is a sell and to correct the bullish extreme we would be looking for a move down to key support at 12000.00
Bitcoin V DXY Dollar Index
Bitcoin Drawdown Comparisons
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