Bitcoin weekly: The breakdown deepens
Despite strong earnings from Nvidia calming AI bubble fears, markets failed to rebound. This is a sign of weakness, and we should be prepared for a period of correction in tradfi, and continued weakness in crypto.
Also watch the accompanying chart analysis on YouTube.
This was not a pretty week in the markets.
Not even Nvidia’s better-than-expected earnings on Wednesday could perk up trader sentiment. So what we have now is a situation where we got good news for the AI narrative to continue, but even that failed to hold up the markets.
Failing to recover on good news like this is not a good sign. At least not for the near future. It’s much too early to call a longer term top in stock markets, as there are likely many people waiting on the sidelines eager to buy dips. But we should be prepared for a larger correction. How long could such a correction last? Wild guess a month or two perhaps.
Crypto markets did even worse than trad-fi, with bitcoin continuing down after last week’s breakdown. As I wrote last week, this was the first failed breakout all the way since the bull market started back in early 2023. It was also the first breakdown below the 50 week SMA since early 2023. This is not something to take lightly, and until we see clear signs of a bottom being in, caution now calls for risk-off.
How low could bitcoin ultimately go? Nobody knows, but the chart shows the next big support level below at $72k-$76k. As long as bitcoin keeps above that level, it doesn’t look too bad long term, as that would keep the structure of higher lows intact. Should it break down below $70k however, things start looking a lot worse.
After a big drop like this, there will come a strong bounce at some point. However, whenever this bounce comes, we must expect that people will sell into it. So while it looks like bitcoin has found some support at $80k for now, we should stay very very cautious.
Bitcoin dominance has not yet turned around to the upside, which is a bit surprising. But like last week, it’s still too early to draw any conclusions here. Except that altseason remains on pause for now.
Well, that’s all for this week. Thanks for reading, I’ll be back with a new update next Monday!
