Bitcoin and select altcoins have dropped to critical support levels and the strength of the rebound lacks strength, increasing the risk of further downside.
After trading near the $20,000 level for several days, Bitcoin (BTC) turned down sharply and dropped below $19,000 on Sept. 6. The fall was not limited to the cryptocurrency markets as the United States equities markets also closed lower on Sept. 6.
Risky assets have been facing selling pressure in the past few days as investors are worried that the Federal Reserve could continue with its aggressive tightening policy.
The CME FedWatch Tool shows that the probability for a 75 basis point rate hike in the September meeting has risen to 80% from 69% a week back. This extended the rise in the U.S. dollar index (DXY), which closed above 110 on Sept. 6.
The U.S. equities markets and the cryptocurrency markets are attempting a relief rally on Sept. 7 but the recovery is likely to sustain only after the DXY shows signs of topping out.
Daily cryptocurrency market performance. Source: Coin360
Although the bear market has been brutal, it is an encouraging sign to see that venture capital firms have continued to plow money into cryptocurrency and blockchain companies. According to a KPMG report released on Sept. 6, the total investments in the first half of 2022 by these firms hit $14.2 billion, which comes after the record $32.1 billion investments made in 2021.
What are the critical overhead resistances in Bitcoin and altcoins that need to be crossed for the bullish momentum to pick up? Let’s study the charts of the top-10 cryptocurrencies to find out.
Bitcoin’s tight range trading between $19,520 and $20,576 resolved to the downside on Sept. 6. The bears pulled the price to the strong support zone between $18,910 and $18,626.
BTC/USDT daily chart. Source: TradingView
If the price rebounds off the zone, the BTC/USDT pair could rally to the breakdown level of $19,520. The bears will attempt to flip this level into resistance. If they manage to do that, the likelihood of a break below the support zone increases.
That could sink the pair to the vital support at $17,622. A break and close below this level could signal the resumption of the downtrend. The downsloping 20-day exponential moving average (EMA)($20,427) and the relative strength index (RSI) near the oversold territory indicate that bears are in control.
The first sign of strength will be a break and close above the 20-day EMA. Such a move will indicate that bulls are attempting a comeback.
Ether (ETH) rose above the moving averages on Sept. 6 but the bulls could not clear the overhead hurdle at $1,700. The bears sold aggressively and pulled the price back below the 20-day EMA ($1,597).
ETH/USDT daily chart. Source: TradingView
The bears will try to build upon the advantage and sink the price below the neckline of the head and shoulders (H&S) pattern. If they succeed, the ETH/USDT pair could drop to $1,422 and then to the important support at $1,280. The pattern target of this bearish setup is $1,050.
Alternatively, if the price bounces off the neckline, it will suggest that bulls continue to view dips as a buying opportunity. The pair could then consolidate between the neckline and $1,700 for some time. A break and close above $1,700 could clear the path for a possible rally to $2,030.
BNB turned down sharply from the 20-day EMA ($282) on Sept. 6 and broke below the critical support at $275. This completed a bearish H&S pattern.
BNB/USDT daily chart. Source: TradingView
Generally, after the breakdown from a major support, the price returns to retest the level. In this case, buyers will try to push the price back above $275. If they manage to do that, several aggressive bears may get trapped. That could result in a short squeeze and the BNB/USDT pair could rally to $308.
On the other hand, if the price turns down from $275, it will suggest that bears have flipped the level into resistance. That could start a decline to $240 and if this support also gives way, the next stop could be the pattern target at $212.
The bulls pushed XRP above the overhead resistance at $0.34 on Sept. 6 but the bears trapped the aggressive buyers and pulled the price below the immediate support at $0.32.
XRP/USDT daily chart. Source: TradingView
A minor positive is that the bulls have not allowed the price to sustain below $0.32. The long tail on the Sept. 7 candlestick shows buying at lower levels. If the price sustains above $0.32, the XRP/USDT pair could extend its range-bound action for some more time.
Contrary to this assumption, if the price turns down from the current level and sustains below $0.32, it will clear the path for a possible decline to $0.30. The bulls are likely to defend this level with all their might.
Cardano (ADA) closed above the 50-day simple moving average (SMA) (0.49) on Sept. 4 and the bulls defended the level on Sept. 5. Buyers tried to extend the relief rally on Sept. 6 but met with a wall of selling near $0.51.
ADA/USDT daily chart. Source: TradingView
The price turned down sharply and broke below the moving averages. Both moving averages are flattish and the RSI is just below the midpoint, indicating a range-bound action in the near term. The ADA/USDT pair could oscillate between $0.44 and $0.51 in the next few days.
The bears will have to sink the price below $0.44 to open the doors for a drop to the crucial support at $0.40. Alternatively, if the price turns up from the current level and breaks above $0.51, the pair could rally to the downtrend line.
Solana (SOL) rallied to the 20-day EMA ($33) on Sept. 6 but the bulls could not overcome this barrier. This suggests that the sentiment remains negative and traders are selling on rallies.
SOL/USDT daily chart. Source: TradingView
A minor positive is that the bulls have not allowed the price to dip below the immediate support at $30. If the price turns up from the current level, the bulls will again try to drive the SOL/USDT pair above the 20-day EMA. If they succeed, the pair could rally to the 50-day SMA ($38).
On the contrary, if the price turns down and breaks below $30, the pair could extend its slide to the vital support at $26. The bulls are likely to mount a strong defense at this level because if this support cracks, the pair could resume its downtrend.
The bulls attempted to push Dogecoin (DOGE) above the 20-day EMA ($0.06) on Sept. 6 but the bears sold the rally aggressively and pulled the price below the immediate support at $0.06.
DOGE/USDT daily chart. Source: TradingView
Buyers are attempting to push the price back above $0.06 on Sept. 7. If they succeed, the DOGE/USDT pair could again rally to the overhead resistance at the 20-day EMA. This remains a critical level to watch out for in the near term because a rally above it could push the price to $0.07.
Contrary to this assumption, if the price turns down from $0.06 or the 20-day EMA, it will suggest that bears are selling on rallies. That could increase the possibility of a drop to the strong support at $0.05.
Buyers attempted to push Polkadot (DOT) above the moving averages on Sept. 5 and 6 but the bears defended the level aggressively as seen from the long wick on the candlesticks.
DOT/USDT daily chart. Source: TradingView
The 20-day EMA ($7.38) is sloping down and the RSI is in the negative territory, indicating advantage to sellers. If bears sink and sustain the price below the immediate support at $6.79, the DOT/USDT pair could slip to the crucial support at $6. The bulls are likely to mount a strong defense at this level.
Alternatively, if the price turns up from the current level and rises above the moving averages, it will suggest strong buying on dips. That could push the pair to $9.17 and later to the overhead resistance at $10.
Buyers defended the 50-day SMA ($0.87) on Sept. 5 and attempted to extend the recovery on Sept. 6 but the bears had other plans. They sold aggressively at $0.92 and pulled Polygon (MATIC) back below the moving averages.
MATIC/USDT daily chart. Source: TradingView
The 20-day EMA ($0.85) has started to turn down and the RSI is near 46, indicating that bears have a slight edge. Sellers will attempt to pull the price to the strong support at $0.75.
This is an important support to watch out for because a break and close below it could complete a bearish H&S pattern. If that happens, the MATIC/USDT pair could start a decline to $0.63 and thereafter to the pattern target of $0.45.
This negative view could invalidate in the near term if bulls push the pair above $0.93. The price could then rise to the strong overhead resistance at $1.05.
The bulls purchased the dip in Shiba Inu (SHIB) on Sept. 5 but they could not sustain the price above the 20-day EMA ($0.000013). This indicates that bears are selling on every minor rally.
SHIB/USDT daily chart. Source: TradingView
The 20-day EMA has turned down and the RSI is just below the midpoint, indicating a minor advantage to bears. The sellers will attempt to sink the price to the psychological support at $0.000010 and then to $0.000009. Buyers are expected to defend this support zone with vigor.
Another possibility is that the price turns up from the current level and breaks above the moving averages. Such a move will suggest that selling dries up at lower levels. The SHIB/USDT pair could first rise to $0.000015 and later to $0.000018.
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Market data is provided by HitBTC exchange.