Crypto Watchlist: Major Support Retest on BTC

 Digital assets have been getting nuked over the past few months, bringing many crypto assets to previous areas of major support. Bitcoin (BTC) fits that bill and it’s likely most crypto traders will be watching this area like a hawk for a break or a bounce this week.

BTC/USD: Daily

Today, we’re taking a quick technical look at bitcoin (BTC/USD) as the market is now back to September 2021 swing lows after a major dip. It was only two months ago when bitcoin made new all-time highs at $69K against the U.S. dollar, before falling almost without any major bounces to retest $40K today (a big ~40% dip!).

This pullback from all-time highs has been mainly driven by broad negative risk sentiment as the COVID-19 pandemic took a turn for the worse (after the rise of the Omicron variant in November), and likely on traders taking down risk as global central banks moved towards monetary policy tightening rhetoric (to combat record high inflation rates). It’s also likely that some premium came out of the bitcoin price after the U.S. government approved a more costly/less correlated futures-based bitcoin ETF rather than a spot based bitcoin ETF as many had hoped for.

Going forward, broad risk sentiment is going to be the likely driver for bitcoin and crypto assets with no major crypto specific catalysts expected ahead. And with expectations of pandemic conditions peaking later in this month, risk sentiment may improve. But of course, monetary policy/interest rates is the biggest driver at the moment, making bond yields another market to watch for directional cues in risk.

So if we see the rally in bond yields top out (U.S. 10-yr Treasury currently around 1.785%, right around the early 2021 top) and if the COVID-19 pandemic numbers steady and reverse, then the odds rise of $40K holding as support if that does lead to a positive shift in risk sentiment.

And with digital asset adoption not likely to slow down in 2022, we may see capital come in from longer-term players/investors on big dips like these, especially those who have missed the boat so far and probably have developed a severe case of crypto FOMO (Fear of Missing Out) over the past two years.

Of course, if monetary policy tightening fears lead to further risk-off behavior and a momentum break below $40K in BTC/USD, then we may see a move to $30K in the following weeks.

But what do you all think? Is BTC a buy?

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