This week has been a tough one on many levels, with Federal Reserve Chairman Jerome Powell finally giving the market some of what it wanted by announcing a 50 basis point interest rate cut.
The S&P 500 hit a new record high and gold continued to rally. Bitcoin (BTC) broke out and surged to $64,133 in response to the policy change and other factors. Despite the Fed's policy confirmation, Bitcoin's short-term price has not deviated from its 6-month trajectory.
As mentioned in previous weeks, the Bitcoin chart shows a structural downtrend. On the longer timeframe, the price is making weekly lower highs, and futures liquidations are driving the price action. Even the move from September 18 to 20 is within the current 6-month range.
At the time of writing, BTC price could see a decline from the previous high (August 24) resistance of $65,000, which coincides with the 200-day moving average. If the weekly candle closes below this level, the weekly lower highs pattern remains valid.
A natural consequence of a breakout like the one seen this week is a retest of support near the 20-day moving average (range $60,000 to $58,500), especially if traders are unable to maintain current trading volume. Over the past six months, spot trading volume has been relatively flat, while the bulk of Bitcoin’s price action has been driven by futures liquidations and options market activity.
On the flip side, following this week’s FOMC event, there has been an uptick in Bitcoin open interest and if traders continue to attack the $64,000 to $66,000 area, there is a possibility of a breakout above the downtrend channel and a change in Bitcoin’s long-term market structure.
As the chart above shows, BTC price has failed to break above the channel’s descending resistance since April 24 and bulls need to achieve a candle close above $66,300 for this to become a reality.
HighStrike’s head of crypto options and derivatives, JJ, opined that a Bitcoin price move above the 200-DMA ($64,000) would likely trigger ‘large short volume and short gamma calls,’ but according to the analyst, Coinbase sellers would first ‘have to take down their walls…’
Traders also pointed to the synchronicity between the Fed’s rate cut closer to the start of Q4 and the September 20 news from the U.S. Securities and Exchange Commission approving options on BlackRock’s Bitcoin spot ETF.
According to Capriole Investments founder Charles Edwards:
“Q3 is the worst time to be in Bitcoin. Q4 is the best.”
