Market Analysis: Bitcoin (BTC) Tests $3,500 Support Level and Then Surges Two Percent; Most Major Cryptocurrencies in the Green Today; February Rally Possible

January 22, 2019 / by Zachary Mashiach

There was anomalous trading activity this morning on the Bitcoin (BTC) spot market with Bitcoin plunging from $3,520 to $3,400 in about five minutes before returning to $3,520 15 minutes later. This indicates someone dumped a large number of Bitcoin all at once, but there is so much fundamental support at $3,500 that other traders quickly bought up the sub-$3,500 Bitcoin. $3,500 has been a solid support level since Dec. 19.

After this anomalous and short-lived event, Bitcoin slowly rallied through the day to as high as $3,615 before leveling out at $3,580. Overall, Bitcoin is up one percent in the past 24 hours.

Most other major cryptocurrencies are up today as well, with Ethereum (ETH) up 1.7 percent, Bitcoin Cash (BCH) up 4.6 percent, Bitcoin SV (BSV) up one percent, EOS up 4.7 percent, Stellar (XLM) up 0.8 percent, Litecoin (LTC) up two percent, Tron (TRX) up 3.6 percent, IOTA up 2.1 percent, Monero (XMR) up 3.6 percent, and Dash up three percent. The total cryptocurrency market cap has increased from $119 billion to $120.7 billion over the day.

Ripple (XRP) is roughly flat on the day, which has caused its lead over Ethereum’s (ETH) market cap to narrow to $680 million. Dogecoin (DOGE) is the only major cryptocurrency down on the day, with a loss of two percent.

Tron (TRX) has seen an increase of 135 percent since reaching its bear market low on Nov. 25, and Tron (TRX) is close to surpassing the Litecoin (LTC) market cap. This is perhaps because Tron (TRX) is gaining more use for the development of dApps and smart contracts. This makes Tron (TRX) a competitor for Ethereum (ETH) at a time when Ethereum (ETH) is losing popularity due to the contentious Constantinople hard fork.

The Bitcoin and crypto rally today may be the result of stocks seeing their worst day since Christmas Eve. The Dow Jones Industrial Average closed down 300 points. This stock plunge is due to trade talks between China and the United States breaking down amid a slowing economy in China. It is believed that Bitcoin (BTC) and cryptocurrency are safe haven assets for investors when the stock market is doing poorly. However, this effect has rarely been observed since the stock market has mostly been in a consistent rally since Bitcoin’s creation in 2009.

The CME Bitcoin futures expiration is coming on Jan. 25, and it is possible that traders will bang the close, meaning they will drop Bitcoin’s price right before the close to increase short-selling profits. However, since support at $3,500 is so strong, perhaps banging the close will just bring Bitcoin back down to the $3,500 level. This would still be solid profits of over 10 percent for short sellers since CME Bitcoin futures traders likely took out their short positions at $3,900 just after the December futures contract expired.

Bitcoin may be ready for a rally once past the CME Bitcoin futures expiration. It would be difficult and risky for short sellers to bring Bitcoin even lower, and it is probably more profitable to let Bitcoin go higher in February. Further, the Wyckoff chart suggests the market bottom will happen at the beginning of February followed by a rally.