(Kitco News) - The cryptocurrency market plunged into the red in trading on Tuesday as a strong move higher by the U.S. dollar exerted downward pressure on financial markets around the world as it attempted to retest its 20-year high.
As a result of the strengthening dollar, Bitcoin (BTC) fell below the psychologically important support at $20,000 to hit a daily low of $19,575, where bulls frantically repositioned themselves in an attempt to prevent further downside.
BTC/USD 4-hour chart
According to Kitco Senior Market Analyst Jim Wyckoff, the bulls have their work cut out for them as they attempt to “stabilize prices and break the price downtrend that is still in place on the daily chart.” This may prove to be a bigger challenge than expected, however, as Wyckoff noted that “bears still have the overall near-term technical advantage.”
Insight into where its price could be headed was provided by Caleb Franzen, Senior Market Analyst for Cubics Analytics, who posted the following chart stating that it “Feels like Bitcoin has a date with the red range below, between $17.8k-$18.9k.”
BTC/USD 1-day chart. Source: Twitter
Franzen suggested that while a pullback to this range is by no means guaranteed, “it's certainly something I'll be watching for.”
Barely clinging to support at $20K
For crypto traders who feel that the past month has been especially painful in the crypto market, the most recent newsletter from on-chain intelligence firm Glassnode adds credence to that perspective.
According to Glassnode, “the scale of capital outflow over the last month is historic.” Only the 2018 capitulation saw a larger outflow, “with the relative magnitude of investor losses in recent weeks [...] hitting 0.28% of the Market Cap per day.”
Profit and loss by return bands. Source: Glassnode
Pointing to this chart in response to those who have criticized the increase in selling that has been seen in recent days as BTC attempted to rally above $20,500, Glassnode noted that “Given this reality, it should be of little surprise that investors are willing to take whatever rallies and profits they can get.”
“The psychology of investor spending patterns remains firmly in the bear market territory, as rallies are sold, and exit liquidity is taken at or around cost basis levels. Given the current remarkably low active user base, it could be considered impressive that the $20k level has held up to date,” Glassnode said.
“Be greedy when others are fearful”
Not all traders in the market are pessimistic about the outlook for BTC moving forward including market analyst and pseudonymous Twitter user Rekt Capital, who pointed out that “It's been ~300 days since the #BTC Bull Market peak at $65000, which means that this Bear Market is getting close to ending.”
According to Rekt Capital, from a historical perspective, “BTC Bear Markets tend to find their absolute bottom price approximately 365 days after the previous Bull Market peak.”
Perhaps the pain being felt by many participants in the market is a sign that it might be time to start accumulating if one were to follow Warren Buffet’s well-known advice to “Be fearful when others are greedy, and greedy when others are fearful.”
#BTC is getting increasingly closer to ending its Bear Market downtrend, slowly reaching the point of maximum financial opportunity
— Rekt Capital (@rektcapital) August 30, 2022
Paradoxically, this is the time when most investors are most dejected, fearful, pessimistic about $BTC#Crypto #Bitcoin
While it's ultimately unknown which way the market will head in the near term, die-hard crypto proponents continue to suggest that being able to acquire BTC anywhere near $20,000 is the deal of a lifetime and will ultimately prove to be a well-timed bet.
The overall cryptocurrency market cap now stands at $956 billion, and Bitcoin’s dominance rate is 39.3%.
