You should probably keep your position size relatively small, and only add as soon as the trade starts to work out in your favor as the volatility will continue to be a major problem.
Bitcoin markets initially fell on Tuesday but then turned around to show signs of life. That being said, the market rolling back the way it has does suggest that we will get a little bit of a bounce. At this point, I think that bounce will more than likely see plenty of selling pressure, due to the fact that monetary policy is tightening up, and that works against risk appetite. Granted, Bitcoin has fallen quite far, which suggests that perhaps we could get a bit of a relief rally.
On a bounce like this, we could go looking towards the $40,000 level, an area that is a large, round, psychologically important figure. With this being the case, the market is likely to continue seeing this as an area of potential resistance, as it was support previously. Ultimately, I do think that Bitcoin has an uphill fight on its hands, and it is really not until we break above the 50 day EMA that I think we can build up any type of momentum. Ultimately, this comes down to risk appetite and you need to keep an eye on the overall macroeconomic landscape. As central banks tighten monetary policy, it takes risk off the table for a lot of traders, and that almost certainly be the case with Bitcoin. Remember, Bitcoin is traded on an institutional level now, and that does mean that the typical headwinds that you see in the stock market now come into play here as well.
If we break down from here, it is likely that Bitcoin would sink towards the $35,000 level, possibly opening up a move down to the $30,000 level. I think the market is more than likely going to continue to see a lot of noisy and erratic behavior, but I also recognize that we are in a downtrend and it will continue to be the way going forward. In general, you should probably keep your position size relatively small, and only add as soon as the trade starts to work out in your favor as the volatility will continue to be a major problem. Longer term, you need to see Bitcoin rally in order for the rest of crypto to move right along as well, so even if you are not trade in this particular coin, you need to pay attention to it.
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