What Lies Ahead For Bitcoin (BTC) After The Recent Pump?

Bitcoin (BTC) made a surprising move yesterday that took retail bears by surprise. In our previous analyses we warned against being overly bearish when there was already extreme fear in the market. However, the fact that BTC/USD was trading well below key resistance levels gave a lot of traders reason to remain short on the market. Yesterday’s move saw a series of key resistance levels being breached in just a few aggressive moves. The manner in which the price pumped past key resistance levels is nothing short of manipulation. The price was driven as a result of a massive short squeeze that saw more than a 60 million shorts being liquidated. Interestingly, when the price crashed after testing the 200 EMA around $7,450 we saw 40 million longs being liquidated.

This is why it is important not to get in front of such manipulated pumps and dumps and trade real trends. The recent pump was of little consequence as the price has now declined back below those key resistance levels. If this was driven by real interest, we would have seen more respect for those key S/R levels. So far, the outlook remains bearish. The price might continue to trade sideways but it is like to decline below the $7,000 mark in the near future. The RSI as well as the Stochastic indicator both now indicate overbought conditions signaling a potential decline within the falling wedge in the days and weeks ahead. Moves like these have simultaneously inflicted pain on both the bulls and the bears in the past as well. Most traders that bought near the top of the previous 43% pump soon saw their investments bleed when the price decline more than 30% in the weeks that followed.

The EUR/USD forex pair has been historically a strong indicator of the future outlook of the cryptocurrency market. The relationship can be confusing on lower time frames but the pattern is very clear on larger time frames. Whenever EUR/USD has broken below a key support or past a key resistance, we have seen similar moves in Bitcoin (BTC). Those moves have not followed immediately because the price of Bitcoin (BTC) takes time to catch up with the EUR/USD forex pair and sometimes there may be no correlation at all on smaller time frames.

We can see on the 4H chart that EUR/USD has now declined below a key trend line support. Regardless of any short-lived bullishness we can see that it has already formed a triple top and does not have much room to rally. The recent volatility in the forex pair had much to do with the UK Election and recently the President Trump’s impeachment. Markets reacted favorably to impeachment developments and we saw risk taking in commodities rise which could explain the surge in the price of Bitcoin (BTC). The most important developments regarding impeachment would be around January and February next year during the Senate trial because that will determine whether President Trump can remain in office or not. The outcome of that trial will have a decisive impact on the stock market and therefore on Bitcoin (BTC) and other cryptocurrencies.