What Will the Future Hold for the Bitcoin Price as Ethereum’s “Merge” Narrative Takes Over?

by James · August 1, 2022

Bitcoin price is currently retesting the 200-week SMA at $22,794, awaiting a minor bounce.
There are three trading opportunities that BTC presents, two of which favor the bears.
A daily candlestick close reversing the $24,565 level would invalidate the bearish thesis.

Bitcoin price has been in decline since the July 30 swing high rejection at a significant resistance level. These developments have pushed BTC to slide lower and are retesting key support floors, while also hinting at the potential for a further move south.

With altcoins rallying due to the upcoming Merge upgrade, investors need to consider the possibility of BTC being left out. However, a sudden drop in the Bitcoin price could negatively affect the ongoing altcoin rally.

Table of Contents

Bitcoin price is bearing fruit for patient traders

Bitcoin price from a higher timeframe shows the formation of an ascending parallel channel since the June 18 crash. Interestingly, the same thing can be seen happening since the start of 2022.

Currently, BTC is hovering around the support confluence consisting of the 200-week Simple Moving Average (SMA) and the 30-day Exponential Moving Average (EMA) at $22,800. The rejection at the $24,565 level has led to a decline, pushing BTC to retest this support confluence.

A breakdown of this level will open the way for a further move south. In such a case, market participants can expect BTC to crash to $21,177, which is the highest volume traded for 2022, also known as the Point of Control (POC).

BTC/USDT 1-Day Chart

Here is a detailed video explanation for the chart above.

Trade Opportunity #1

Let’s take a closer look at the Bitcoin price on an hourly time frame.

This chart shows that BTC has made Monday’s range of $23,508 and $22,875 and also swept the area low, suggesting the possibility of a reversal. In addition, the major crypto is also supported by the 200-week SMA at $22,794, lending credence to the possibility of a quick uptrend.

Therefore, the first trading opportunity is to extend the Bitcoin price after a quick recovery above Monday’s low (ML) of $22,875 with partial take profit at Monday’s high (MH) of $23,508. The remaining amount can be sold at the one-hour Fair Value Gap ( FVG), also known as price inefficiency at $24,347.

The stop loss for this trade can be dynamic; That means a four-hour candlestick below the 200-week SMA of $22,794 would signal the presence of selling pressure and thus closing the long position.

BTC/USDT 1 hour chart

Trade Option #2

This trade assumes that the Bitcoin price meets the FVG of $24,347, which would be a signal to open a short position. The reasoning behind this bias is taken from a high timeframe chart explained at the beginning of the article.

Partial profit for this short position can be taken at the 200-week SMA at $22,794 as a minor bounce may occur here.

A breakdown of the support confluence at $22,794 will lend credibility to our short position and the remaining position can be closed at the one-hour FVG of $21,730. Overall, this move will amount to a decrease of 10%.

BTC/USDT 1 hour chart

Trade Opportunity #3

This trade is basically what would happen if trade opportunity #1 doesn’t pan out and Bitcoin price produces a four-hour candlestick close below the 200-week SMA at $22,794. In such a case, investors can wait for BTC to test the recent reversal resistance on a new level.

Rejection of the 200-week SMA will serve as a secondary confirmation, in which case investors can open a short position with a stop-loss placed generously above the MH.

The target for the third trade is the same as the second trade – $21,730.

BTC/USDT 1 hour chart

Unlike the first or second trade, the third has a high risk due to the unclaimed liquidity and price inefficiency of the upside. Market players should therefore consider all possibilities before taking action.