Key Talking Points:
Significant Headwinds Ahead for BTC/USD
The bullish run in Bitcoin over the last few sessions has been short-lived. The main cryptocurrency has been rejected at the 23.6% Fibonacci level (35,916) as JP Morgan warns about new headwinds for Bitcoin in the coming weeks, bringing its target valuation down to $23,000.
They have identified the impending unlocking of shares in the Grayscale Bitcoin Trust (GBTC) purchased in January under a six-month lockup period as a source of downside risk to the cryptocurrency.Grayscale Bitcoin Trust, the world’s largest digital-assets fund manager, allows institutional investors to gain exposure to Bitcoin through shares in the trust. It is estimated that it currently holds more than 3% of the cryptocurrency’s supply.
Despite the improvement over the next few days, the outlook remains bearish as China continues to tighten control over the digital asset space, which has caused large liquidations, making it hard to call a bottom. The 50% Fibonacci level (29,112) seems like a good place to start for now. This was the area where BTC/USD bounced back on Tuesday after dropping below 30,000 for the first time in 5 months.
Given how Bitcoin tends to group around psychological round numbers, a renewed break below $30,000 could see bears aiming for the $25,000 mark, where further buyer support may arise. On the topside, $35,000 is the key area to break for new buyers to attempt a bullish reversal back above $40,000.
BTC/USD Daily chart
Ethereum Stuck Below Trendline
Ethereum (ETH/USD) has managed to recover above the 200-day SMA but continues to struggle to regain its footing above the $2,000 mark. It is also faced with a descending trendline which has held resistance pretty strongly since the May high, so bulls will need to gather strong momentum to achieve a reversal. Given how sentiment in the crypto market is currently far from robust ETH/USD could struggle to consolidate above the trendline and therefore may continue to drift lower.
ETH/USD Daily Chart
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— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin