Its been another day of inactivity in the crypto markets. Overall, assets have been moving sideways and this is mainly due to uncertainty in the macro-environment. Bearish technical structures are suggesting a bad fourth quarter for bitcoin. Let’s take a look at what they are.
Bitcoin price is showing weakness due to its inability to break above the $11k resistance level. Technical analysts have identified key price levels for bitcoin to be $9,800, $10,700, and $11,800. This means that as long as bitcoin stays within these levels, we should expect low volatility.
The CME Bitcoin futures market gap of $9,600 has yet to be filled, and given that most gaps get filled, the level remains a target.
The monthly candle is expected to close below $11k, which would confirm a red month of September. Since August 17th, we’ve consistently made lower highs, signaling bearish sentiment.
Bitcoin was able to break above $10.8k on September 28th, but it was short-lived and likely a bull trap. Prices rose to as close as $10,950 but were hugging the resistance level too close to break out. When this happens, the probability of it being a bull trap is high.
Bitcoin’s recent fall from $10,950 signals rejections at the monthly, daily, and hourly time frames. This shows cautious and bearish structures in the short-term. If it matches with a monthly candle closure, it could tip off a near-term downtrend.
Throughout the past three years, every September monthly candle has closed red. During the past two consecutive quarters, BTC recorded 42.46% and 13.59% drops. Given that bitcoin has a tendency to underperform in the fourth quarter, the chances of a continuation towards the downside remain high.
Let’s consider the fact that we underwent another halving, and in 2016 we experienced a positive fourth quarter. Things might play out similarly. If bitcoin follows past post-halving trends, it could see a gradual climb over the next 12 months. In 2016 it took 15 months for prices to peak at $20,000, setting the all-time-highs.
Uncertain Macro Environment
From March through August, we have seen all types of assets rally. This was due to multi-trillion-dollar stimulus packages and the fear of inflation. Now, we see a different environment where uncertainty remains, but stimulus does not. In the upcoming months, we will see major volatility due to the U.S. presidential election. On top of that, the U.S. is indecisive about another stimulus package, which is bad news for the markets. It’s most probable that there will be another package, but the delay is causing concerns.
Due to this, stocks have been in a slump and bitcoin will follow if concerns about another wave of cases don’t go away. According to Bank of America, investors withdrew $25.8 billion from the stock market last week, which marked the biggest single-week outflow since June 2019. At that time, trade war concerns were growing.