The U.S. government recently moved over 10,000 bitcoin (BTC) from a government-linked wallet, a transaction worth around $600 million to a wallet associated with Coinbase Prime.

This move follows a previous transfer of $2 billion in late July. Currently, the US government holds approximately $12 billion in bitcoin, mainly from law enforcement actions like the Silk Road seizure.

The U.S. Marshals Service recently awarded Coinbase a contract to manage large-cap cryptocurrency assets. So this transfer could be for custodial purposes rather than an intent to sell.

While it’s unclear what will happen to the bitcoins after the transfer, should the crypto market be worried that the government might sell this bitcoin, which would flood the market with supply, and cause prices to dump?

It looks like that’s exactly what might be happening now.

Welcome to TA of the Day (TAOTD)! 👋

Let’s focus on the current technical setup of BTC/USD based on the 4-hour chart:

📈 Technical Analysis of BTC/USD 4-Hour Chart

Using technical analysis concepts covered in our forex course, let’s analyze BTC/USD.

Moving Averages (SMA):

1. 10-period SMA: Positioned at 59,139. The price is currently below this level, indicating short-term bearish momentum. The downward slope suggests continued pressure on the price.
2. 50-period SMA: Positioned at 59,501. The price is also below this level, confirming the bearish sentiment in the medium term. The slope is downward, supporting a continuation of the downtrend.
3. 100-period SMA: Positioned at 60,184. The price is below this level, reinforcing the bearish outlook. The downward slope indicates that bearish momentum is sustained in the medium-to-long term.
4. 200-period SMA: Positioned at 62,894. The price is significantly below this level, indicating a long-term bearish trend. The downward slope suggests that the long-term bearish trend is well-established.

Relative Positioning of Moving Averages:

• The 10-period SMA is below the 50-period SMA, which is below the 100-period SMA, and all three are below the 200-period SMA.
• This alignment in a bearish order (shorter-term SMAs below longer-term SMAs) strongly supports the continuation of the downtrend across multiple timeframes.
• The widening gaps between these moving averages indicate increasing bearish momentum.

Market Structure:

• Overall Structure: The market structure is predominantly bearish in the short to medium term, with a series of lower highs and lower lows since mid-July.
• Change of Character (ChoCh): The most recent Change of Character occurred when the price broke below 60,000 after previously forming a higher low.

RSI (Relative Strength Index)

• RSI (14): The RSI is currently at 38.16, indicating that the market is nearing oversold conditions.
• This suggests that while the overall trend is bearish, a short-term bounce could occur due to the oversold nature of the market.

🕵️ Key Observations

Price Action:

Let’s analyze the recent price action of BTC/USD based on the chart:

1. Overall Downtrend: The price has been in a general downtrend since mid-July, characterized by lower highs and lower lows.
2. Previous High: In late July, bitcoin reached a high of around 70,000, which marked the start of the current downtrend.
3. Significant Drop: Following the July high, there was a sharp decline to about 53,500 in early August, representing a substantial price drop.
4. Recovery Attempt: After hitting the low of 53,500, there was a notable recovery attempt, with the price rebounding to around 62,000.
5. Rejection at Resistance: The recovery was met with resistance around the 62,000-63,000 level, coinciding with the 100 SMA, leading to a rejection.
6. Consolidation Phase: For about a week in mid-August, the price consolidated in a range between roughly 58,000 and 61,000.
7. Recent Sharp Decline: The most recent price action shows a sharp decline from the consolidation range, breaking below 58,000 and dropping to current levels around 57,115.
8. Increased Volatility: The recent candles show increased volatility, with longer wicks indicating indecision and rapid price swings.
9. Volume Spike: There’s a noticeable spike in trading volume accompanying the recent price drop, suggesting strong selling pressure.
10.  Support Test: The current price is testing recent support levels, attempting to stabilize after a sharp decline, with the immediate focus on the 56,700 area.

Support and Resistance Levels:

• Long-Term Resistance: 70,000 (July peak)
• Major Resistance: 62,755 (aligned with the 200-period SMA) a crucial resistance level that the price needs to overcome to reverse the bearish trend.
• Immediate Resistance: Immediate resistance is noted at 60,000, aligning with the 100-period SMA, where previous attempts to break higher have failed.
• Immediate Support: Immediate support is around 56,700, with further support at 53,500, aligning with previous price action and a significant swing low.
• Major Support: 53,500 are significant levels to watch, with 53,500 being a critical level where buyers might step in more aggressively.
• Psychological Support: 55,000 (round number).

RSI (Relative Strength Index)

• Trending downwards, confirming the price downtrend.

Volume Analysis:

• Volume has increased slightly during the recent decline, indicating that the move lower is supported by stronger selling pressure.

🤔 Potential Trade Scenarios

Is BTC/USD a buy or sell?

The following trade scenarios are provided solely for educational purposes. Since they don’t include full risk management practices, they are not intended to serve as actual trade recommendations, but merely food for thought to help you generate your own trade idea.

Long Bias:

• Consideration Point: Consider entering a long position if the price finds support near 56,700 and shows signs of a bounce, such as a bullish reversal candlestick pattern or positive divergence on the RSI.
• Invalidation Point: Consider setting a stop-loss below 55,000 to manage downside risk.
• Potential Target: The initial target would be 59,000, with a secondary target of 60,000.
• Rationale: A bounce from the 56,700 support level, combined with the RSI nearing oversold territory, suggests the potential for a short-term rally. However, given the broader downtrend, this would be a counter-trend trade with tighter risk management.

Short Bias:

• Consideration Point: Consider entering a short position if the price fails to break above the 60,000 resistance level and shows signs of further bearish momentum, such as a rejection at resistance or continuation patterns like a bear flag.
• Invalidation Point: Consider setting a stop-loss above 60,500 to limit exposure to a potential bullish breakout.
• Potential Target: The initial target could be 53,500, with potential further downside if the bearish momentum continues.
• Rationale: A break above key resistance levels combined with the overall bearish trend suggests that a continuation of the downtrend is more likely, making a short position favorable.

📝 TAOTD Summary

The recent price action suggests that bitcoin is experiencing significant selling pressure.

It is at a critical juncture, testing recent lows and approaching critical support levels.

Traders are likely watching closely to see if the current support holds or if there will be a further breakdown.

The market structure on the 4-hour chart suggests that BTC/USD is in a bearish phase, with the potential for further downside.

The breakdown from the recent consolidation, the sharp move down with increased volume, and the alignment of technical indicators (price below SMAs, bearish RSI trend) support this view.

However, the approach to significant support levels and the potential for oversold conditions suggest that a bounce or consolidation could occur in the near term.

The overall structure remains bearish until there’s a clear break above recent lower highs.

Immediate key levels to watch are the 56,700 support (a break below could accelerate the downtrend) and the 59,000-60,000 resistance zone (a break above could signal a potential trend reversal).

You should closely monitor price action at these levels to determine optimal entry points.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.