Published
4 years ago on
February 03, 2020
Bitcoin (BTC) is about to make its next big move but it couldn’t do that over the weekend. The reason it couldn’t do that is because BTC/USD still looks up to major financial markets like the stock market and the currency market to decide what to do next. In fact, it is the whales that decide what to do next but they need to look at the outlook of larger markets to make that decision. At the moment, the Dow Jones Industrial Average (DJI) has shown some signs of weakness. The decline was accelerated by uncertainty around the Coronavirus. We expected volatility in the market in February anyway due to some key political developments up ahead. We have the Iowa Caucus today with which the race to pick candidates will begin.
While the US Presidential Election is still far away, the results of the primaries alone have the potential to stir big waves in financial markets. A lot of political analysts still opine that if the Democrats had not been so divided the last time, they might still have won. If Bernie Sanders had been the candidate, then the probability of him winning the previous election would have been much higher because a lot of people who voted for Trump would have voted for him instead at that time. At this point, many polls still show that President Trump would win the next election. However, with the Impeachment Trial in the Senate, things are not so clear. This uncertainty could be the major catalyst in bringing about the next market correction that is now long overdue.
Bitcoin (BTC) has faced rejection at a key horizontal resistance level corresponding to the previously broken market structure. It is unlikely to close above $10k and risks a decline below the 200-day moving average in the near future. It is important to note that it might take a while for BTC/USD to decline but we do expect it to decline in the manner that it did in 2014 because it seems to be closely following that part of the previous cycle.
Now, the question is, “How low could Bitcoin fall?” The answer depends on the extent of the next stock market correction. If the Dow Jones Industrial Average (DJI) declines down to the 61.8% fib level at 22,964, we would expect Bitcoin (BTC) to decline down to $1,800. If the stock market declines further, we would expect BTC/USD to decline down to $1,200 to find support at the previous peak as it did during the 2014-15 bear market.
