Bitcoin is set to complete its first 2 consecutive bullish weeks of price action in over 2 months, this week as the market enjoys an appreciation of 8.11% over the past 7 trading days. At the time of writing, Bitcoin is trading around $6750, recently breaking above the $6,800 barrier before falling again. Bitcoin has seen a price increase of 3.70% in the past 24 hours trading alone.
This second consecutive bullish week will be extremely important to long term Bitcoin holders who have suffered a year of sustained losses and this may provide hope that the bearish decline may soon be over.
Bitcoin is currently the reigning cryptocurrency ranking in at number one in terms of overall market cap value across the entire industry, with a total market value of $117 billion. This is a significant $51 billion lower than the market cap high of $168 billion seen not two months ago on the 5th of May as indicated by the graph below.
Although this price increase could serve as a signal for a potential long term reversal, it is important not to get over excited and to wait for more confirmations before committing to any significant positions.
Let us analyse market price action over the long term and assess its performance.
BTC/USD – LONG TERM – DAILY CHART
Analysing the market from a long term perspective, we can see that price action had experienced a major bullish run toward the final months of 2017, rising from a low of $2980 on the 15th of September 2017 to an all time high of $19,891 on the 17th of December 2017. This was an epic price increase of over 550% from low to high.
After placing this all time high, price action went on to depreciate throughout the year of 2018, originally finding support, in February, at the .786 Fibonacci Retracement priced at $6622. This is a Fibonacci Retracement taken from the epic bullish run described above. The market went on to retest this .786 Fibonacci Retracement again during April and June before breaking below this level in June.
We can also see that, before price action broke below the .786 Fibonacci Retracement, the market was trading within the confines of a descending triangle, the .786 Fibonacci Retracement effectively acted as the lower boundary of the triangle. As the market dipped below the descending triangle, it fell until it found support at $5783. This was the low day close price seen in November, highlighted by a blue horizontal line.
Price action rebounded as it hit this blue level, reversing to where it is currently trading once again at the .786 Fibonacci Retracement priced at $6622.
Let us continue to analyse price action over the shorter term closer to find some likely areas of support and resistance.
BTC/USD – SHORT TERM – DAILY CHART
Analysing the market from a closer perspective, we can see that price action rose from a low of $6425 on the 1st of April to a high of $990 on the 5th of May. This was a price increase of 55% from low to high.
Price action then went on to degrade, falling below the starting price point of the April bullish run and consequently falling below the flow of the descending triangle. We can see how price action fell all the way to the November low day day close highlighted by the blue line before aggressively rebounding. It is also important to note that this support area is bolstered by a 1.414 Fibonacci Extension level, taken from the entire bearish swing leg seen in April, priced at $5847.
Price action bounced and managed to battle back above the .786 Fibonacci Retracement where it currently finds support. If the bullish momentum can continue, the nearest level of resistance will come at the bearish .382 FibonaccI Retracement priced at $7380. This is a Fibonacci Retracement taken from the bearish decline witnessed during May and June, starting from a high of $9,990 on the 5th of May, extending lower to a price of $5,755 experienced on the 24th of June. This was a price decline of 42% from high to low.
If the bullish momentum can continue, further resistance will be found at the 100 day moving average (black line) followed by the upper boundary of the descending triangle. If the market can break above the descending triangle and clear the bearish .618 Fibonacci Retracement level at $8375 we could consider that the market has reversed into a bullish market.
Alternatively, if the bearish pressure within the market re-enters over the next few days the first area of support is expected at the blue line priced at $5783. If the bearish momentum pushes the market further lower, support can be expected at the long term .886 Fibonacci Retracement (highlighted in red) priced at $4931.
As July started trading the technical indicators began to swing into the direction that favours the bulls within the market. The RSI had battled its way up from oversold conditions at the 20 handle in mid-June and above the 50 handle. This indicates that the bullish momentum within the market is growing and that the bearish momentum has subsided. If the RSI can continue to remain above the 50 handle, we can continue to expect the bullish momentum to continue.
SImilarly, the moving averages are providing strong favour toward the bulls within the market. The 7 day EMA (blue line) and the 21 day EMA (purple line) have crossed up above one another for the first time in over 2 and a half months. If the 7 day EMA can continue to move away from the 21 day EMA this will indicate that the bullish pressure within the market is increasing.
It is extremely easy to get overly excited within the crypto markets when price action posts a couple days of green momentum. However, in the case of Bitcoin we need to continue to remain disciplined and wait for confirmations that the trend has indeed reversed. A break to the upside of th descending triangle could suffice as an initial confirmation that the market is in the process of a reversal.