Last week we said:
Bitcoin’s price analysis is still looking very bullish, and thankfully it is starting to cool off – meaning that the next leg up is getting closer. Despite it’s beginning to cool off, the market is still incredibly greedy, and I expect more consolidation before the all-time high is broken. In times such as this, remember to take extreme caution while trading. Bitcoin has a history of breaking the rules, so you can’t be too careful. BTC will likely continue to range between the 18-19.5k levels, with supports at 18.6k and 17.4k (the 100 and 200MA). Likewise, expect $20k to be an extreme psychological resistance.
Bitcoin’s price has continued to consolidate over the past week, bottoming out around the support zone of 17.4k, exactly as we predicted. The $17.4k support zone held quite strongly, and BTC has bounced upward, where it is now consolidating once again around the 19.4k mark.
Let’s take a look at the charts this week and see if we can predict BTC’s next movements.
Price Analysis
There are a few different scenarios playing out on the price charts for this week. Let’s take a look at each of them.
Our first scenario is a neutral wedge with an upward break out. As you can see, a wedge pattern was being formed between the two red lines over the past couple of weeks on the 4H chart. The lines are determined by local highs/lows of the price action. BTC has broken out of the wedge, with the price rising above the top red line, and then retesting it, with the top line resistance becoming support (green line). This would be a bullish scenario, indicating that we have established a new support zone around 19k.
Our second scenario is a more bearish one, which moves the topline resistance to show the strong resistance found between 19.6k and 20k. This pattern is a rising wedge pattern, which is generally a precursor to bearish (downward) price action. In this scenario, BTC is likely to trade upward in an increasingly narrow price consolidation zone before breaking downward. Supports could be found once again at 17.4-17.6k, and again at 16.3k.
Let’s take a look at some indicators and other time frames to see which scenario is more likely.
Adding our 20, 100, and 200MA lines to the chart, we can see that the moving averages are in accordance with the rising wedge pattern. The 200MA is near the bottom (support) line, and the 20MA is showing slightly bullish, with a golden cross forming yesterday. All three lines are inclined upward – bullish. If BTC breaks out convincingly and holds above 19.6k, this scenario would be invalidated.
The RSI on the 4H chart is currently around 61, meaning that it is slightly overbought – but there is still room for upward growth before a price correction would be required. This is neutral.
The above chart shows the RSI as well as the 20 and 200MA lines. All of these indications are bullish, with the RSI only reading around 61. The last time BTC was at this price point, the RSI was at 70, and it is currently at 60 – meaning that BTC is in a stronger position now to continue its upward trend than it was two weeks ago.
Investor Sentiment
Fear Greed Index, taken from Alternative.me
Fear Greed Index, taken from BTCtools.io
Today we’re going to take an average of two prominent fear/greed indexes, taken from alternative.me and btctools.io. The former gives a reading of 91, and the latter 67, for an average reading of 79. This average reading is still in the category of “extreme greed” – although less so than it did at the beginning of the month.
Typically when the FGI reads “extreme greed” it means a correction is due – however during hype cycles this may not be the case. Generally speaking this is a bearish sign, but the index has cooled off a bit – indicating that we may yet go upward.
Fundamental Analysis
Bitcoin’s hash rate continues to recover after the recent drop, which was probably caused by China’s crackdown on Bitcoin miners. The increase in hash rate means that the inherent value of bitcoin – calculated by the electricity cost to create one new coin – is rising.
This pairs with the miners revenue on track to break its yearly high and possibly retest the all time high, which would require the price of BTC to eventually rise to $50k by the end of this bull cycle. Though not guaranteed, this provides us with a long term price target.
Conclusion
BTC continues to strengthen, forming strong support zones at 17.6k and 16.3k. The moving averages are looking bullish, and the RSI has cooled off to the point where BTC could rocket upward at any minute. It’s possible that either one of our two scenarios will play out, with BTC retesting the $20k major resistance zone before making a decision. For now, an extended consolidation period is the most likely. During times of indecision such as this, it’s important to trade with increased caution. Never trade more than you can afford to lose.
This is not financial advice. Opinion of the author only, intended for entertainment and education. Do your own research.
