Bitcoin (BTC) has been trading sideways these past few weeks but the S&P 500 has not. In fact, the stock market has had a very clear direction the whole time Bitcoin (BTC) was trading sideways. For a moment, investors and analysts believed that the stock market is likely to enter a long term bear trend when the SPX dropped below the 2700 level. However, we soon saw the price recover and climb back above that level. In fact, not only did the price climb back above 2700, it also managed to rally above the 21 Week EMA. This once again shifted the sentiment in favor of the bulls lending credibility to the notion that the correction was over.
The past few weeks, the S&P 500 has once again dropped below the 21 Week EMA. If the price manages to close above the 2700 level, this entire development could be chalked up as an inverse head and shoulders formation. However, if the price closes below the 2700 level, which is quite unlikely, we may see further downside. In any case, what happens in the stock market has a strong impact on what happens with Bitcoin (BTC). If the S&P 500 does manage to form an inverse head and shoulders, we should see the price rally aggressively from current levels. Bitcoin (BTC) will profit off this rally and we might see a rise towards $10,000.
The upcoming S&P 500 rally and Bitcoin (BTC)’s rally between November and December would vindicate our previous claim that Bitcoin (BTC) is likely to rally between October and December on account of seasonality. This time, as the stock market rallies, we would see a rally in Bitcoin (BTC) but this rally is most likely to be followed by a minor correction. That being said, 2019 will no doubt be the year that Bitcoin (BTC) can be expected to reach a new all time high. The price has bottomed out but investors are still reluctant to buy in as long as the situation with the stock market remains murky. The biggest fear most investors have is that they want to have capital at hand if things go out of hand with the stock market. Getting in and out of Bitcoin (BTC) is not as easy as stocks for institutional investors.
Bitcoin (BTC) has bottomed out by every account. If we consider the price action as a standalone event, we can see that it is flattening out and preparing for a trend reversal. If we consider the price action as a mirror image of the price action in 2015, we reach the same conclusion. Back in 2015, during the final stages of correction, the price broke above the triangle and then found support along the previous resistance line, just like it has this time. If we look at the above BTC/USD daily chart, we can see that the price bounced strongly off the resistance turned support. In the weeks ahead, we should see Bitcoin (BTC) leaving this trend line to formally begin a new cycle, following in the footsteps of the S&P 500 as well as its own price action during 2015.