Bitcoin Analysis: Price Action Finds Support at the .382 Fibonacci Retracement; Can the Bulls Pick Up Steam From Here?

Bitcoin has suffered a small 0.05% decline over the past 24 hours of trading. This isn’t much considering the bullish run we had just experienced. The number 1 ranked crypto giant is currently being traded at $7,592 after experiencing a 7.26% drop over the past 7 trading days.

Bitcoin has had an eventful month during July as prices have risen 15.68% over the past 30 trading days. This has been partly due to the anticipation of the SEC allowing the Winklevoss Twins ETF proposal to go ahead. However, it was rejected with much debate amongst the SEC chairman who voiced her descent against the verdict. The chairman stated that she would like to not hinder the growth of an innovative technology but the rest of the board claimed the technology was still too primitive.

However, as each rejection passes we come closer and closer to an approval of an ETF which would allow serious investors to seriously consider investing into the Bitcoin asset through the ETF.

Bitcoin is currently ranked at pole position in terms of rankings across the entire industry. It currently has a market cap totalling $167 billion. However, this is $37 billion lower than the market cap high witnessed 3 months ago on May 5th 2018, as indicated in the graph below.

bitcoin 2 august

Let us continue to analyse price action over the long term for Bitcoin.

Price Analysis


bitcoin 2 august 2

Analysing the market from the long term perspective above, we can see that Bitcoin had experienced a serious bullish run as price action started from a low of $2980 on 15th September 2017 and extended to an all time high priced at $19,891 on December 17th 2018. This was a price increase totalling 545% from low to high.

After placing the all time high, the market continued to roll over and initially found support at the .618 Fibonacci Retracement priced at $9463. This is a Fibonacci Retracement measured from the entire bullish run aforementioned. However, the market was not able to hold this level and proceeded to drop below the 100 day moving average, falling until it found support at teh .786 Fibonacci Retracement during February, priced at $6622.

We can see that for the majority of the year, price action was trading within the confines of the descending triangle highlighted above. The base of the triangle was denoted at the blue line priced at $5783 and the upper boundary acts as a falling resistance line. The market had recently broken above the upper boundary of this descending triangle as it pushed itself above the 100 day moving average.

This break above the descending triangle could signal a potential long term trend reversal, however, it is still far too early to come to this conclusion. For a confirmation that the trend truly has reversed from bearish to bullish we will be waiting until the market breaks above and completely clears the $10,000 handle.

Let us analyse price action a little closer over the short term to highlight any potential support and resistance zones.


bitcoin 2 august 3

Analysing the market from a short term perspective, we can see that during May and June price action was declining from a high starting at $9964 on the 6th of May and fell to a low of $5790 on 29th of June. This low was strongly supported by the lower boundary of the long term descending triangle outlined in the previous section.

We can see that as July started trading the moving average crossed over one another (as mentioned in our previous BTC analysis article) and the market proceeded to start a small bullish run. We can see that price action started from a low of $5780 on the 29th of June and extended to a high of $8506 on the 24th of July. This was a price increase totalling 47% from low to high.

The market had hit resistance at the bearish .618 Fibonacci Retracement level (drawn in black) priced at $8371 and reversed. This is a Fibonacci Retracement measured from the bearish decline starting in May and ending in June. We can see that this area of resistance was bolstered due to a confluence of a 1.414 Fibonacci Extension level priced at $8290.

The market has since retraced slightly, finding support at the short term .382 Fibonacci Retracement (drawn in red) priced at $7460. This short term Fibonacci Retracement is measured from the bullish run starting from June 29th and ending at July 24th. We must also be aware that this support zone is significantly re-enforced by a 100 day moving average which is hovering in the same area.

If the bearish momentum continues and pushes the market below $7460, we expect the nearest level of support to come in at the short term .618 Fibonacci Retracement priced at $6822. This would most likely bring trading action back into the confines of the previous descending triangle.

Alternatively, if the short term .382 Fibonacci Retracement proves to provide a solid foundation of support, we expect near term resistance to be immediately located at the bearish .618 Fibonacci Retracement (drawn in black) priced at $8371. If the market can continue further above this level the next level of anticipated resistance lies at the 1.618 Fibonacci Extension level priced at $8656 followed by the bearish .786 Fibonacci Retracement priced at $9078.

The technical indicators within the market have recently shifted toward favouring the bears. The RSI is trading marginally below the 50 handle, indicating the recent bearish pressure over the past 5 trading days. If we are to expect the bullish run to continue, we would need to see the RSI cross back above the 50 handle.

However, the moving averages are still favouring the bulls at this moment in time. The 7 day EMA is still trading above the 21 day EMA which is still trading marginally above the 100 day SMA. However, the 7 day EMA (blue line) is pointing in a steep downward direction indicating that the bearish momentum over the recent few days is picking up. So long as the 7 day EMA does not cross below the 21 day EMA (purple line) we can still expect the market to continue its recent bullish run.




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