After a strong rise over the last several months, momentum in Bitcoin has been waning, prompting one analyst that has thus far been long BTCUSD, to flip neutral.
A break in sideways price action and a return to volatility is expected soon, but which way will the first-ever cryptocurrency head next?
Hedge Fund Manager Prepares to Short Bitcoin Under $9,000 As Momentum Wanes
In February 2020, Bitcoin price broke up through downtrend resistance but failed to hold above $10,000.
On its way back down, news broke the pandemic was going to cause a large strain on the economy due to the lockdown conditions mandated to stop the aggressive spread.
This prompted a catastrophic selloff across cryptocurrencies and the greater financial market. Cryptocurrencies were decimated, the stock market tanked, and even safe-haven assets like gold and silver couldn’t withstand the sudden liquidity crisis.
Related Reading | Decision Time: Top Crypto Traders Expect Massive Bitcoin Move In Days Ahead
After the dust settled, Bitcoin and equities markets began to flourish again. At that time, hedge fund manager Thomas Thornton took a long trade on BTCUSD based on a signal from the TD Sequential indicator made by Thomas DeMark.
He was able to ride the uptrend for significant profits, closing out with one of the recent 13 Countdown signals.
The new DeMark Sequential provides different types of buy or sell setups and signals. The latest sell signal has prompted Thornton to stay neutral on Bitcoin, until either a push higher or a break below $9,000.
According to Thornton, any price action below $9,000 would be a signal to short BTCUSD down to lower prices.
#Bitcoin with new DeMark Sequential sell Countdown 13. No current position – short <9000 pic.twitter.com/ZBM91e0KEA
— Thomas Thornton (@TommyThornton) June 17, 2020
The Cryptocurrency’s Continued Correlation With the S&P 500 Could Cause Strong Breakout
Bitcoin price, however, has been tightly correlated to the S&P 500 throughout much of 2020.
Both assets were cut down to size during the Black Thursday selloff, and both have made a V-shaped recovery since. Now, the two vastly different assets are both trying to confirm this V-shaped recovery as a bottom formation, and make a strong push higher.
$SPX futures current view. Potential for a little more upside ahead of DeMark Sequential Sell Countdown. Similar secondary sell Countdowns seen in Jan/Feb too If you want to see more take a two week free trial at https://t.co/VlbTlbjAOw pic.twitter.com/GkNf9TpoMg
— Thomas Thornton (@TommyThornton) June 17, 2020
Using the same set of DeMark tools, Thornton sees the S&P 500 pushing higher in the days ahead to perfect a sell setup the hedge fund manager is watching closely.
Given how tightly correlated the two assets have been, chances are if the S&P 500 makes another strong move up, so will Bitcoin.
Related Reading | Bitcoin Following Scarily Similar S&P 500 Fractal Would Set New All-Time High By Late 2020
The S&P 500 would reclaim its all-time high – a level it is currently not all that far off from.
Bitcoin on the other hand, would likely breakout from $10,000 resistance, but to retest its former all-time high, it would take another $10,000 rise from there to reach $20,000.
Although it is highly unlikely, this is cryptocurrency we’re talking about, and anything is possible. After over 50 days of consolidation, although momentum may be flattening as Thornton points out, a breakout above the resistance could cause one of Bitcoin’s strongest moves ever.