Bitcoin Off Highs as Panic Subsides

FXOpen

Bitcoin is trading off the highs as what seems to be China-related panic buying subsides in the past few days. Bitcoin’s little brother, Litecoin, is also down after yesterday’s liquidity spike retraced completely.

Bitcoin Off $455 Highs

Everyone’s favorite cryptocurrency is trading at $445 flat right now. This is almost $10 dollars below last week’s high at $454.98. That high reached seems to be (at least in part) due to panic buying after the People’s Bank of China guided the Yuan 0.51% down, to its lowest level since 2011. This led to market panic both in China and across the world.

BTCUSDH4-jan12

It’s always hard to pinpoint cause and effect in financial markets as prices are influenced by a multitude of factors. Did the bitcoin rally happen due to panic selling across the world? Or was BTC used as a vehicle for transferring money out of China like some suggest?

In the past few days the PBOC has reversed course somewhat, fixing the Chinese currency higher against the Dollar and intervening in the offshore Yuan market. This brought down the offshore USD/CNH rate to 6.57 right now, from as high as 6.70 just yesterday.

The important bitcoin levels haven’t changed much. To restart the rally, we’re looking for a decisive breakout above $470 dollars. Above here we have major resistance at the November highs around $500 dollars per coin. A clearing of this area could lead to more gains.

On the other end, the ”number to beat” is still the $400 round figure. A breakdown below here could start a new BTC downtrend. Important support levels can be found at former swing high at $379 dollars, followed by the $350 round figure. We have somewhat weaker support levels below here at $340 and $310 dollars per coin.

Litecoin Liquidity Spike Retraces

Litecoin spiked to a high of $3.65 dollars yesterday. This seems to be a liquidity spike due to a market order in a weak orderbook. As we can see on the chart below, the volume during the spike wasn’t substantially higher compared to the previous and subsequent candles. This points that there was no heavy buying during that time.

LTCUSDH1-jan12

Those gains have been slowly eroded in the past 24 hours and we’re currently quoted close to the $3.50 round figure on Fxopen. In our last LTC article we noted $3.64 as a weaker resistance level. Yesterday’s bounce near here solidifies that level as resistance. Higher up we have a weaker level at $3.76 dollars per coin. But the important breakout figure is higher up at $3.82 dollars. The bulls will need to stage a clean breakout above this swing high to trigger a new rally. Higher up more resistance levels can be found at $4.00 and $4.50 dollars, followed by the November high at $4.85 dollars.

On the downside, a decisive breakdown below $3.35 dollars could start a new LTC downtrend. The first support below here can be found at $3.26 dollars per coin, followed by the round $3 dollars figure. Lower still we have the former swing low at $2.88 dollars, followed by two more potential support levels at $2.70 and $2.50 dollars per coin. We end the levels to the downside with the January swing high at $2.40 dollars and the $2 dollars round figure.

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