Bitcoin (BTC) is in a phase of indecision. This recent consolidation seen on the 4H chart for BTC/USD seems no different than the previous consolidation which led to a heavy decline. However, when analyzed closely there are a few strong differences that suggest that the outcome this time might be different. Before we get into that, let us explore why Bitcoin (BTC) has been consolidating in this manner for such a long time. The current pattern formed on the chart should be enough to make a move yet Bitcoin (BTC) keeps printing 4H candles in consolidation without a definitive direction. Well, as mentioned in our previous analysis on Bitcoin (BTC), the price action of Bitcoin (BTC) is nothing but a consequence of the price action of major stock market indices at this point.
During the past few days, we have seen Bitcoin (BTC) perform more like a speculative asset rather than a commodity like Gold which is considered a safe haven asset. What we have seen is that when things get rough on the stock market, Bitcoin (BTC) suffers. If we believe in Satoshi’s vision of Bitcoin (BTC) then we should also believe that ultimately Bitcoin (BTC) will become a safe haven asset rather than a speculative one because that is its whole purpose of existence. Bitcoin (BTC) was not created to add another speculative asset to the market. In fact, it was created to protect against financial crises like the one in 2008 after which Bitcoin (BTC) came into existence. The reason we have not seen Bitcoin (BTC) exhibit that kind of a behavior is because to most investors it is still a speculative asset.
As a speculative asset, Bitcoin (BTC) is following in the footsteps of major stock market indices. At the top of the list is the Nasdaq Composite. If you have been following Bitcoin (BTC)’s price action yesterday, you might have noticed that every move it made in a 5 minutes timeframe was directly related to the moves made by the Nasdaq Composite. In fact, the 4H chart for the Nasdaq Composite shows that when the index risked a fall below the 5 EMA, Bitcoin (BTC) immediately reacted and the price fell sharply. Both Bitcoin (BTC) and the Nasdaq Composite have successfully retested and bounced off historical supports. What remains to be seen now is what exactly the Nasdaq Composite is going to do when the stock market opens today.
Bitcoin (BTC) will continue to follow in the footsteps of the Nasdaq Composite but one of two things has to happen at this point. Either the Nasdaq Composite breaks a 10 years long trend line that has not been breached once since the financial crisis of 2008 or the price continues to recover and move towards a new all time high. Now, I have reasons to believe that a stock market crash is extremely unlikely at this point but that is beyond the scope of this analysis. If we look at the chart for Nasdaq Composite, we can see a bull flag being formed on the RSI. If we go back and look at the first chart for Bitcoin (BTC), we can see a similar but even more pronounced bull flag being formed. This supports our view that both the Nasdaq Composite and Bitcoin (BTC) will rally from current levels and postpone the crash most likely till 2023.