Bitcoin risks further decline in Q4 due to the confluence of bearish technical structures and macro uncertainty.
The price of Bitcoin is showing weakness after another strong rejection of the $11,000 resistance level. As Bitcoin (BTC) enters Q4, market sentiment remains generally cautious and neutral.
Bitcoin could face a major setback in Q4 due to several key factors. Over the past three years, every September candle has closed in red. The monthly September candle for 2020 is also on track to close in red, indicating a lack of direction.
From March to August, favorable financial conditions, a low interest rate environment and a multi-billion dollar stimulus package caused Bitcoin and stocks to recover in tandem. In the coming months, due to the U.S. presidential election in November, the likelihood of a delay in the stimulus approval increases. The growing uncertainty around the macroeconomic landscape and the U.S. financial markets could put pressure on BTC.
Traders are generally cautious in the short term and optimistic in the medium to long term. Technical analysts have identified key price levels for BTC as $9800, $10,700, and $11,800. As long as Bitcoin remains in the $9,800 to $10,700 or $10,700 to $11,800 range, low volatility is expected. Therefore, although traders are cautious about the short-term trend of Bitcoin, many don’t anticipate a large drop.
As a potential area of interest, traders are considering the $9600 CME gap that forms when the Bitcoin price rises or falls below the price of the Bitcoin futures market after it closes for the weekend or holidays. The $9,600 gap has not yet been filled, and given the tendency of most WEC gaps to fill, the level remains a target.
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A short-term bearish structure
Bitcoin’s monthly candle is expected to close below $11,000, which would confirm a red candle for the month of September. In technical analysis, if a new candle closes below the previous one’s close, it’s called a „bearish gulp.
In addition, the monthly Bitcoin close would come after repeated rejections, as since August 17, BTC has recorded four consecutive lows on the daily chart. The formation of a lower high occurs when the last peak is below the previous one. In this case, Bitcoin reached a peak of $12,468, $12,050, $11,179 and $10,950, respectively.
Bitcoin faces two technical bearish patterns and structures in the monthly and daily charts. Both time frames are considered high time frame charts in technical analysis, which could increase the probability of a short-term reversal.
The Bitcoin price briefly broke the $10,800 resistance level on Sept. 28, but a pseudonymous trader known as „Byzantine General“ said it was most likely a bullish trap. The BTC rose to $10,950 in the major exchanges, but was „embracing“ the resistance level. When the BTC struggles to come out of a key resistance level cleanly, the possibility of a „bullish“ trap is high.