The total cryptocurrency market capitalization is sitting under $300 billion as the digital assets continue to get crushed leading Bitcoin and Altcoins lower. Bearish red volume is creeping up signalling a significant increase in selling confirming the strong bear trend present since December. From a technical standpoint Bitcoin looks weak, breaking critical support levels sending price headed towards the next major support around $6000. Fundamentals are improving with progress stretching from ETF launches to regulatory progress, with the market still remaining bearish. From a technical standpoint for Bitcoin, the price has broken towards the downside out of the symmetrical triangle pattern. This is a bearish sign and if the price stays below this pattern, the downtrend would continue. Moreover, on a daily time frame, the price trading below the 200, 100 & 50 day moving averages (shown in pink, orange, green respectively). This further confirms the bear strength from a technical perspective. If Bitcoin breaks down further and cannot hold a major support line around $6000 we could see prices head violently lower to its next major support of $5100 and next major support at $4900.
It is interesting to note that on the daily chart the 50 EMA (exponential moving average) seems to be acting as resistance, with Bitcoin failing to hold above the line in three separate instances. Once in late February, early March, and again breaking down below the 50 EMA in May. If we look back to 2017 during the latest bull cycle the 50 EMA acted as a solid support. When prices would retrace to the 50 EMA a bounce would follow extending Bitcoin to new highs. Many traders agree that until Bitcoin is able to break above the 50 EMA and stay there, the bear trend is still valid and prices may continue lower.
To identify a long term trend relationship traders will also keep a close watch on the 200 SMA in relation to the 100 SMA. When the 1000 SMA crosses below the 200 SMA a bear trend can be confirmed. However when the 100 SMA crosses back above the 200 SMA, the probability for a bullish trend is increased.
Technicals aside, there is a lot of positive news cryptocurrency investors should be excited about. Coinbase announced that its index fund is official open for business. The index fund is likely targeted towards accredited investors due to the investment requirements of at least $250,000 to upwards of $20 Million. The reason this is exciting is due to the fact that ETF’s makes onboarding for institutional money easier. Large institutions and Pension funds are not the ones to day trade stocks and other assets. It can take months if not years for institutions to size into positions. The same can be said for institutions selling out of positions. They tend to sell out strategically in order to have little influence on short term price action. The more ETFs that are available in a regulated and secure environment, the more attractive a cryptocurrency investment may seem to institutional investors.
Positive news out of the SEC resulted in a green day across the board for many crypto assets. Ethereum is up just about 10% after the ruling that it will not be categorized as a security. This resolved the massive amount of uncertainty regarding the issue and restored investor confidence in the second largest cryptocurrency. Having the SEC willing to work with cryptocurrency is positive for the space thus further legitimizing the industry.
Even though price action has been bearish pushing many investors to sell at staggering losses, fundamentals are increasing as each day passes. Perhaps this could be a second chance for people to accumulate at low prices in preparation for the next bull cycle that is expected to be even more powerful than the last. It is still important to watch key price levels in order to identify buying points to mitigate risk and achieve a logical risk to reward ratio for mid to long term trading.