Bitcoin price analysis (27 September–03 October): is it time to buy the dip?

Bitcoin is attempting a recovery after the recent FUD

A bitcoin token                                 
A crackdown on bitcoin by China has depressed prices but they could bounce back. Photo: Shutterstock
                                

The People's Bank of China has intensified its crackdown on cryptocurrencies, saying in a statement on 24 September that virtual currencies "are not legal and should not and cannot be used as currency in the market."

Although the ban has been in place since 2017, the new measures to enforce the ban efficiently rattled the crypto markets, though the damage was limited.

This was not the first time that China has come out all guns blazing against cryptocurrencies. According to Cointelegraph, there have been 19 instances of FUD – “fear, uncertainty and doubt” in crypto-speak – out of China and Hong Kong but, barring minor blips, the crypto sector has continued to grow from strength to strength.

The chief executive of MicroStrategy, Michael Saylor, was quick to point out on Twitter that technologies banned in China have been a good way to make money in the past decade.

Marion Laboure, a senior economist and market strategist at Deutsche Bank, wrote on the bank’s website that bitcoin could “become the 21st century digital gold” but may “remain ultra-volatile in the foreseeable future”.

Dennis Lynch, head of the global team at Morgan Stanley’s asset management subsidiary Counterpoint, while discussing bitcoin at Morningstar's annual investment conference on 23 September said: "I like to say that bitcoin's kind of like Kenny from South Park: he dies every episode, and is back again," Markets Insider reported.

So can bitcoin shake off the latest FUD from China or will bears pull the price below $40,000? Read our bitcoin price trend analysis to find out.

Bitcoin price technical analysis: weekly chart

Bitcoin price technical analysis: weekly chart. Credit: Currency.com
Bitcoin price technical analysis: weekly chart. Credit: Currency.com

Bitcoin’s price turned down and plunged below the 20-week exponential moving average (EMA) last week. The BTC/USD pair corrected 8.66% to end at $43,172.35. 

The long tail on last week’s candlestick indicates that bulls are attempting to defend the 50-week simple moving average (SMA). The 20-week EMA has flattened out and the relative strength index (RSI) is just above the midpoint, indicating a balance between supply and demand.

If the price sustains above the 20-week EMA, the bulls will attempt to push the price to the overhead resistance at $52,953.85. This is an important level to watch out for because a break above it could clear the path for a rally to $60,000.

Contrary to this assumption, if bulls fail to sustain the price above the 20-week EMA, the bears will again try to sink the pair below the 50-week simple moving average (SMA). If they succeed, the pair could plummet to $28,639.70.

The bitcoin price weekly analysis shows the bulls are attempting to start a relief rally from the 50-week SMA.

Bitcoin price technical analysis: daily chart

Bitcoin price technical analysis: daily chart. Credit: Currency.com
Bitcoin price technical analysis: daily chart. Credit: Currency.com

Bitcoin’s price is correcting inside a descending channel. The pair rebounded off the support line of the channel on 21 September and the bulls will now try to push the price above the resistance line of the channel.

If they succeed, the pair could rise to the 50-day SMA, where the bears may again mount a stiff resistance. A break and close above the 50-day SMA will be the first sign that the correction could be over. The pair could then rally to $48,826.30 and later race higher to $52,953.85.

This positive view will invalidate if the price turns down from the resistance line of the channel and breaks below $39,565.25. The pair could then drop to the support line of the channel. A break below this support could result in panic selling, pulling the price toward $30,000.

How to trade bitcoin this week

Bitcoin may face strong selling pressure near the 20-day EMA and then again at the 50-day SMA but if bulls clear this zone, it will indicate the correction may be over. The pair could then climb toward $50,000. On the downside, selling could pick up momentum below $39,565.25.

The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial advisor before arriving at a decision. Always remember cryptocurrencies are highly volatile assets and that past performance is never a guarantee of future results. Your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money. Never invest more than you can afford to lose.

Bitcoin to US Dollar
Daily change
63210.2
Low: 62301.5
High: 66429.8

Further reading

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