Bitcoin pullback or meltdown?

At Tricio we look at charts in order to gauge investor sentiment and behaviour.  We occasionally look at Bitcoin as a speculative commodity in some of our client research and consultations. We don’t see BTC as a traditional long-term investment nor as an asset that satisfies traditional emotional needs like precious metals sometimes do. As a speculative commodity (with derivatives available on various exchanges, including the CME) traders can sometimes expect big swings in sentiment now and then which can lead to trend changes.

The monthly chart below (semi-log with 12 and 60-month moving averages) shows the big uptrend since 2015. This is in line (coincidence?) with the big upswing seen in many big US and other mega-cap tech shares from 2015. And of course, the big swing higher in gold prices (USD and other currency) over the last 10 years as the yellow metal surged from just below $1,100/oz. to over $4,000/oz. now. Of course, long-term fans of BTC would argue that it has been in a big uptrend (discounting some swings…) since it was launched.

For our purposes, the monthly chart below shows that the current dip in the price of BTC is working below the 12-month moving average. This leaves the steeper rising line near $72,500 at risk of being tested. Mean reversion fans will be looking at the 5-yr. moving average near $54,500 as a potential risk/target level below this. Big fears? The flatter support line near $10,500 could be at risk of being tested if a pullback turns into a meltdown.

The weekly chart below can be useful in looking at potential support and resistance levels. The Trump tariff hit to investor sentiment saw BTC test the $74,440 area which now marks significant chart support. A drop below this key low would leave the August 2024 low near $49,200 exposed for testing on a deeper drop. A key area between these to watch may be the April 2021 high near $65,000 and the November 2021 high near $69,000. The June low near $28,750 marks a key long-term support level to watch below these. Big meltdown chart support? Remember the 2022 tumble in shares and bonds? BTC approached $15,500 on this selloff. Regaining the 50 and 13-week moving averages would bolster sentiment in the commodity if seen. Chart levels from $98,000 to $104,000 and then just below $108,000 are key as well for bulls to regain for new highs. 

Bottom line? We are watching the current pullback and in line with our view on other risk assets, see some potential for further consolidation. Given how sentiment can swing around in this commodity, despite the HODL (‘hold on for dear life’) investment philosophy that many BTC fans adhere to, prices can swing around sharply. Tests of support, if and when seen, will give clues on how sentiment is developing over the coming months.

Gerry Celaya, Chief Strategist