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Reasons Why the Bitcoin Price will Plunge Soon

Kun Hu   Sep 23, 2020 17:30 3 Min Read


Images updated on 24 September, 2020, 02:23 (UTC) 

Bitcoin Price Technical Analysis
The Bitcoin price will plunge again if the 90-day moving average (MA), currently the strong support level, turns into a resistance level.
90MA BTC.jpg
Source: TradingView, Bitcoin Price Daily Chart

Consistent with our previous analysis, Bitcoin and Ethereum appear to still be at risk of a significant price drop. The market so far has verified our analysis. After the Bitcoin price plunged, the price action now sits below the 90-day MA, and 90-day MA is now forming as a stronger resistance level for BTC. This is a dangerous signal and may cause a price plunge again.

Ethereum and DeFi Token price technical analysis

Ethereum is weaker than Bitcoin. But the 90-day MA as a support level for Ethereum is much stronger than the 90-day MA for Bitcoin. The Ethereum price action has been above its support level since it is plunge two days ago.

ETH 90.jpg

Source: TradingView, Ethereum Price Daily Chart

Ethereum price is highly correlated to the leading Defi project tokens fluctuations, especially DEXs. The decentralized exchanges are promising, but the token price hype seems to be collapsing. After taking advantage of UniSwap's work, with SushiSwap's excellence in marketing, Sushi token skyrocketed to around $16 on the first day of its launch on Sept 1, then it dropped sharply.

sushi 90.jpg

Source: TradingView, Sushi Token Price Daily Chart

Now the Sushi token price is around $1.2 falling consistently over the last 23 days. Feeling seriously threatened by SushiSwap's series movements, UniSwap issued its own native token UNI in a rush on Sept 17. The UniSwap UNI token surged to $15 on the first day of listing. Although the UniSwap token is receiving a warmer welcome than Sushi, with Coinbase listing UNI and snubbing Sushi after its issuance, UNI's price plunged just the same as the Sushi token has experienced. Now UNI has dropped to around $4 only over the last 7 days. Both tokens have created huge wealth in a very short time and it is quite natural to sell the token before the hype and craze are over and the bubble is realized by everyone. 

UNI 24.jpg

Source: TradingView, UNI Token Price 6-h Chart

Both Sushi token and UNI token are in the downtrend without any sign of a substantial reversal. Sushi's token price may even drop below $1 as we previously analyzed. The falling of DeFi tokens will consequently pull down the Ethereum price. As the 90-day MA is an important support level for Ethereum, the loss of support level will put significant pressure on the Ethereum price. This in turn will pull down the Bitcoin price as well. As the Bitcoin 90-day MA is becoming weak as a support level and getting stronger as a resistance level, we can expect the next plunge to occur soon.

Gold Market, US dollar index

The US dollar index is getting high these days but there seems to be nowhere near enough momentum to continue its rise. The rise of the US dollar strength is not good news for assets. The gold price index dropped in response to the rise of the US dollar. US stock continues to stumble along weakly these days, given the turbulent factors including economic discovery uncertainty, the Death of Supreme Court Justice Ruth Bader Ginsburg, the Incoming fierce Presidential election, the still ongoing numbers of COVID-19 case, and the looming danger of military conflicts between the US and China. 

usd-chart-20200923.jpg

Source: MarketWatch, US Dollar Index chart (5 days)

It seems there is a strong correlation between the gold price and the Bitcoin price. But Bitcoin price has its own movement pattern. Although Bitcoin as the internet currency, which has the potential to replace fiat money in some sense, most financial behaviors like loans are measured by the US dollar. The whole world is eager for US dollars. The rise of the US dollar index and the weak stock market is no doubt having a negative effect on Bitcoin and the whole crypto market.

Summary

Given the conditions of the COVID economy, stock market, US dollar rise, and technical analysis, we can expect both Bitcoin and Ethereum prices will drop soon. 

 

With additional reporting provided by Lucas Cacioli

Image source: Shutterstock

Disclaimer: Readers should conduct their own research before taking any actions. Blockchain.News is not responsible or liable for any content.

Related:  Bitcoin Price is Ready to Break $10,000—Here’s Why 

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