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Has Bitcoin reached the buy-zone?

Photo of: Joseph Stone
by Joseph Stone

While it was trading near $38,000 yesterday afternoon, Bitcoin fell sharply last night and overnight, bottoming out at $32,450 around 4am. This represents an impressive drop of about 15% in about 12 hours, which is cause for concern. However, this drop does not fundamentally change the profile of Bitcoin at the moment, and thus could be an opportunity to buy Bitcoin.

Although it didn’t fall sharply during the first part of the day yesterday, Bitcoin took in several less-than-encouraging pieces of information, the accumulation of which may perfectly explain the cryptocurrency’s weakness.

First of all, it should be noted that last weekend a significant Chinese social network blocked several pages related to cryptocurrencies. Given recent Chinese comments confirming a ban on crypto trading in the country, this has raised fears of stronger government action against cryptocurrencies.

Another negative factor for Bitcoin is a report by Goldman Sachs that Asian hedge funds are increasingly moving away from Bitcoin, which tends to confirm that institutional investors, after being interested in cryptocurrencies, have quickly grown weary.

While it cannot be said that this played a key role in Bitcoin’s fall last night, it is also relevant to note that former US President Donald Trump had some strong words about Bitcoin and cryptocurrencies in general.

“Bitcoin, it just looks like a scam,” Donald Trump indeed said, adding, “I don’t like it because it’s another currency that’s competing with the dollar.”

Finally, the latest news that could explain the strong downward pressure on Bitcoin this Tuesday concerns the prospect of current U.S. President Biden speaking about cryptocurrencies this weekend at a G7 summit.

Jake Sullivan, Biden’s National Security Advisor, said at a White House briefing that President Biden will discuss the role of cryptocurrencies in the recent headline-grabbing ransomware cyberattacks. In particular, it will be recalled that the most significant pipeline in the eastern United States was blocked for several days by one such attack, which demanded a ransom in Bitcoin.

Thus, there is little chance that the US President’s comments this weekend will help Bitcoin to rise. However, it is also unlikely that he will announce anything concrete, as most analysts agree that achieving effective regulation of cryptocurrencies will still take a long time.

As such, buying Bitcoin in the face of a further fall next weekend could also be a good idea.

Does technical analysis suggest that this is a good time to buy Bitcoin?
From a charting perspective, it should be noted that last night’s drop, while worrisome, could be an excellent opportunity to buy Bitcoin at a low price. The main technical argument in favor of this strategy is that Bitcoin has not yet tested the $31,500-32,000 level where the May 19 and May 23 lows are located.

A break below this area would therefore be a bearish signal, which would anticipate a quick drop to $30,000, a threshold that could also act as a support.

Thus, as long as the $30,000 mark is not broken, the current fall can be seen as an opportunity to buy Bitcoin.

If BTC does go back up, the intermediate psychological threshold of $35,000 will be the first potential resistance, before the 200-hour moving average which clearly blocked Bitcoin yesterday, and which is currently around $36,600. Further up, the psychological threshold of $40,000 will also be considered as a potential obstacle, before the 200-day moving average at $41,900.