September through the eyes of a Quant

Michal Hladký

Technically and fundamentally, we are constantly in a downtrend for crypto and so far there is no indication of the opposite. Bitcoin, as the market leader, is falling in periodically. It creates consolidation windows of varying lengths on its way down and rarely has the strength to test the lower limits of these structures.

Image: Bitcoin and its journey from the top

However, there is one interesting phenomenon. At the beginning of the new school year, there was somewhat of a "business fever" regarding Bitcoin. You may recall that in last month's commentary I mentioned that the key support level for Bitcoin would be in the price range between $18,000 and $19,000. I would probably best compare this area to trench warfare. Despite great pressure and repeated tests, the trench was still not overcome. In addition, throughout the past two months, we have recorded record volumes of trades on the spot market - we have never seen such high participation before.

Image: BCUSDT spot trading volumes increasing, August (yellow) and September (red)

Only one thing is certain now. While stocks (as measured by the S&P500 index) fell by another nine percent in September, Bitcoin's fall did not occur in the same period. We are currently observing a lower correlation with the stock market. We can say that the inability of the bears to break through the support level of 18-19 thousand mark indicates a certain strength, interest and even confidence in the most famous cryptocurrency. Does that mean we've finally bottomed out and are going up? Given the poor fundamentals and current structure of the market, we are more likely to see only a short-term correction wave, during which the market will look for sellers in the areas between 21 and 25 thousand. From a trader's point of view, down here the support is not an attractive area for trades from the short category. The potential for profit is very limited, and the probability of a breakthrough remains quite uncertain. An experienced trader will either wait for support to be broken or look for opportunities to short in the resistance areas above.