It would seem that last week’s carnage in equity markets was sharp enough to impact all risky assets including Bitcoin. Nasdaq 100 (QQQ) is under the influence of a big head and shoulders top pattern. Tax loss selling in QQQ could accelerate, and everybody who bought tech stocks in 2018 would then be underwater (Figure 1).
Bigger picture, we do think that traditional asset managers will have to buy crypto to diversify their holdings in 2019. In the short term, crypto may be impacted by declines in Nasdaq. Massive selling in other markets may lead to a consolidation period in Bitcoin (BTC).
Looking at the tactical picture in Bitcoin (BTC), the most interesting support point is at $3,641. That level is support in that it is the 50 percent retracement of the recent up move(Figure 2). If Bitcoin (BTC) does hold this level, it could facilitate the creation of a head and shoulders bottom. If Bitcoin falls below $3,641, the next support is at $3371 (Figure 2).
Above the market, $4,053 (Figure 3) and $4,180 are the levels Bitcoin (BTC) needs to break above to start the next leg of any up move.
Another critical chart that seems relevant is a three-day chart of total crypto market cap (Figure 4). Right now, the total crypto market cap is at resistance. What does this imply? It likely means that Bitcoin (BTC) is going to need help from coins like Ethereum (ETH) and other alts to advance past the $4,000 to $4,100 resistance zone.
Bottom Line: The stock market’s problems can be everybody’s problem on days when QQQ drops in a vertical fashion. Our view is that turmoil in legacy markets will create buying opportunities in Bitcoin (BTC). By now, it is apparent that FOMO is not a necessary or recommended approach to take to get involved any future Bitcoin rally.
Fear in legacy markets is likely on the side of crypto investors. Fear in legacy creates the dips needed to buy Bitcoin (BTC) for a long-term move to much higher levels.
As you read this, I am working with clients and colleagues in the Cyrpto.IQ trading room to plan the tactics that will allow us to catch any future Bitcoin (BTC) rally. Join me in the planning process.