Bitcoin Breaks Resistance After Fed Rate Cut: What's Next?

Bitcoin Surges Past Key Resistance

Bitcoin has finally broken out above a massive area of resistance, liquidating a large number of short positions in what appears to be a short squeeze. This breakout occurred shortly after the Federal Reserve announced a 0.5% (50 basis point) interest rate cut, which had an immediate and significant impact on the crypto market.

The Federal Reserve Rate Cut

The Federal Reserve's decision to cut interest rates by 50 basis points came as a surprise to many, as it's unusual for such a large cut to be implemented outside of a major financial crisis. Historically, 50 basis point cuts have coincided with significant economic events:

• The last time this occurred was just before the 2008 global financial crisis
• Prior to that, it happened as the dot-com bubble was unwinding in the early 2000s

However, it's crucial to understand that correlation does not imply causation. These rate cuts did not cause the financial crises - they were implemented in response to economic conditions. In fact, lowering interest rates is generally considered a bullish factor for the economy, as it can help mitigate the severity of economic downturns.

Technical Analysis of Bitcoin's Price Action

Daily Timeframe

On the daily chart, Bitcoin has confirmed a breakout above the resistance zone between $60,200 and $61,200. This area had previously acted as support, and now that we've closed a daily candle above it, it should theoretically become a new support level.

Key levels to watch:

• Support: $60,000 - $61,000

• Secondary support: $59,500

• Tertiary support: $58,000

• Major support: $56,000 - $57,000

• Resistance: $63,000

• Key resistance: $64,500

• Major resistance: $67,000 - $68,000

A confirmed breakout above $64,500 would be the first sign of a potential bullish trend reversal on larger timeframes, as it would establish a new higher high. If Bitcoin can break and close above the $68,000 - $68,500 range, it would likely signal the continuation of a major bull market for several months.

Short-Term Outlook

On the 8-hour timeframe, Bitcoin is showing a potential bearish divergence between price and the Relative Strength Index (RSI). However, this divergence is not yet confirmed, as we need to see at least one, preferably two, red candle closes to cement the lower high in the RSI.

If this bearish divergence confirms, we might see a slight pullback or choppy sideways price action for a couple of days. It's important to note that this is not necessarily a bearish trend reversal signal, especially given the recent breakout above key resistance.

Liquidation Analysis

The recent price surge triggered a small short squeeze, liquidating a significant amount of short positions. The liquidation heat map shows that a major area of liquidity between $61,500 and $62,000 was taken out during this move.

Current liquidity areas to watch:

• Upside liquidity: $62,600 - $63,000
• Downside liquidity: $58,500 and $57,200 (now below key support)

The primary area of liquidity to watch is just below $63,000, which could act as a magnet for price in the short term.

Ethereum Analysis

Ethereum is still technically within a larger bearish trend on the 3-day timeframe, as it has not yet confirmed a bullish trend reversal. However, it continues to hold above major support between $2,150 and $2,200.

Key levels for Ethereum:

• Support: $2,150 - $2,200
• Resistance: $2,450 - $2,500
• Major resistance: $2,800

A breakout above $2,800 would be needed to flip the larger timeframe trend bullish. In the short term, Ethereum is likely to see either a bullish relief or choppy sideways price action due to an ongoing bullish divergence.

On the 3-hour timeframe, the RSI is approaching overbought territory, which could signal a short-term cooloff from the recent bullish price action. However, this doesn't necessarily mean a trend reversal - it could simply result in sideways consolidation before potentially continuing higher.

Solana Price Action

Solana has once again bounced perfectly from its support zone between $120 and $128, demonstrating strong buyer interest in this range. The price is currently facing resistance between $138 and $143, which was previously a support level.

Key levels for Solana:

• Support: $120 - $128
• Resistance: $138 - $143
• Secondary resistance: $153
• Major resistance: $159 - $163

A confirmed breakout above $143 (with a daily candle close) would be a very bullish signal, as there is little resistance immediately above this level. This could potentially lead to a move towards the $160 area.

Trading Opportunities and Risk Management

For those looking to trade these market moves, it's essential to use a reliable exchange with good liquidity and trading tools. Some popular options include:

1. Bybit - Offers up to a $30,000 deposit bonus for new users.
2. Bonex - An alternative for users who cannot access or KYC on Bybit, offering a $5,500 deposit bonus and 10% discount on trading fees.

Regardless of the platform you choose, always practice proper risk management:

• Use stop-loss orders to limit potential losses
• Don't risk more than you can afford to lose
• Consider using limit orders to enter trades at specific price levels
• Keep an eye on key support and resistance levels
• Be aware of potential liquidation levels, especially when using leverage

Conclusion

The crypto market is showing increased volatility following the Federal Reserve's interest rate cut. Bitcoin's breakout above key resistance is a bullish signal in the short term, but traders should remain cautious of potential pullbacks or consolidation.

Ethereum and Solana are also showing positive signs, with both coins holding key support levels and displaying bullish divergences. However, larger timeframe trends remain bearish until we see confirmed breakouts above major resistance levels.

As always, it's crucial to conduct your own research and analysis before making any trading decisions. The crypto market can be highly unpredictable, and past performance does not guarantee future results.

Stay informed, manage your risk, and never invest more than you can afford to lose. Happy trading!

Article created from: https://youtu.be/-pu0Ww51I3k?si=QslVfSGgDRKt2M4P