The bitcoin move on Tuesday August 29th 2023 had the crypto bulls excited. The catalyst? The US Court of Appeals for the D.C Circuit siding with Grayscale in a lawsuit against the Securities and Exchange Commission (SEC) which had denied the Company’s application to convert the Grayscale Bitcoin Trust to an ETF. Bitcoin, Ethereum and other cryptocurrencies surged on this news.
The reason? That this decision will pave the way for bitcoin ETFs. Especially the spot Bitcoin ETFs that financial giants BlackRock and Fidelity want to create. A spot bitcoin ETF would be traded through a traditional stock exchange and would allow investors to gain exposure to bitcoin without having to own the coin itself. Think of GLD and gold. Crypto bulls believe this would be a major catalyst for bitcoin because it would lead to mainstream adoption and see an influx of both retail and institutional money.
After a bitcoin pop of over 6% on the day this news came out, the momentum has faded. From a technical analysis perspective, when one sees a big green candle with a large percentage move, one should expect the next day to see the momentum continue if the bulls are fully in control. Instead, we saw profit taking and sellers jump in.
In this article, I will break down the charts from the long term, to the crucial intraday level we are testing RIGHT NOW.
For those that prefer video format, check out my recent Chart Attack video. The technical retest I alluded to in that video has turned out to come true.
Let’s start with the wider picture.
The weekly chart displayed an inverse head and shoulders pattern with the reversal trigger being confirmed with a weekly candle close above the $24,600 zone. This breakout occurred during mid March 2023. The breakout then took us up to the next technical resistance at the $31,300 zone. A zone which remains relevant for bulls.
After pulling back, bitcoin confirmed a retest of the broken resistance zone (now turned support) with buyers stepping in at $24,600 during mid June 2023. News came out of a BlackRock bitcoin ETF which spurred a move back to the retest above $31,000. After weeks of attempting to breakout, bitcoin failed to do so and did not ride the momentum. Instead we have pulled back.
The takeaway? The uptrend remains intact as long as bitcoin remains above $24,600 on the weekly chart. For a continuation, bitcoin must close above $31,300.
The daily chart shows the weekly rejection clearly. I wrote about bitcoin ranging around the $31,000 zone and the breakdown on July 24th being a key turning point for the crypto. $29,700 was the higher low on the daily chart that broke and bitcoin attempted to regain this level three times on retests. It could not close above and sellers were in full control causing a sell off to the $25,000 area. Very close to our major weekly support zone.
Now do we continue the downtrend? Or does bitcoin base here and manage to retest resistance again.
From a technical perspective on the daily chart, bitcoin is in a downtrend until it can close above $29,700 (where my horizontal black line is).
But here is where things get interesting:
The intraday chart is where the momentum from the news made its biggest impact. Day traders were watching this range, and the Grayscale ruling triggered a breakout on the intraday chart taking us above $26,500. You can see that currently, bitcoin is retesting this breakout zone. This is a critical zone to determine whether bitcoin continues to rally, or if the momentum fades. If the 4 hour candle closes below this support zone, the blue zone I have highlighted, then it is very likely bitcoin continues lower with the Grayscale momentum being nothing but just a corrective move in this downtrend. If bitcoin can see buyers step in and confirm a close back above support, then momentum can continue depending on the following candles.
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