- Bitcoin printed an eight-month high of $6,964 earlier today. Further strengthening the long-term bullish bias is a bull cross of the 100- and 200-day moving averages (MAs) – the first since July 2015.
- A sustained move toward the next resistance at $7,411 (September 2018 high) could be preceded by a price pullback, as the 14-day relative strength index (RSI) is currently reporting overbought conditions.
- Pullbacks, if any, will likely be reversed by the historically strong 30-day moving average (MA), currently at $5,450.
- The long-term bullish outlook would be invalidated only below the 200-day MA at $4,405.
There seems to be no stopping the bitcoin (BTC) freight train.
The leading cryptocurrency by market value jumped to $6,964 at 06:00 UTC today on Bitstamp, the highest level since Sept. 5, 2018, having found acceptance above the crucial 200-week moving average at $6,500 in early Asian trading hours.
Prices have set a new multi-month high for the fourth straight day and have rallied in excess of over 70 percent in the last 5.5-weeks.
Notably, with the sharp rally, the 100-day MA of bitcoin’s price has moved above the 200-day MA. That is the first bullish crossover between the two averages since July 2015.
The development further confirms the long-term bearish-to-bullish trend change signaled by several technical indicators, including a golden crossover, over the last few weeks.
The moving average studies, however, are lagging indicators and have limited predictive abilities, as they take old price history into account.
Even so, investors may take heart as a similar crossover in July 2015 was followed by a 2.5-year bull run.
The 100-day MA has crossed the 200-day MA from below (see above left). The latest bullish crossover comes two weeks after the confirmation of a golden crossover of the 50- and 200-day MAs.
The last bull cross of the 100- and 200-day MAs (above right), confirmed on July 26, 2015, remained valid for 33 months, during which the price rallied 8,000 percent to a record high of $20,000.
With the next mining reward halving due in May 2020, the doors seem open for BTC rise further over the long-term.
The short-term outlook is also bullish. The 30-day MA is trending north with the price creating bullish higher highs and higher lows. BTC, therefore, looks set to extend the rally to the next resistance level at $7,400.
A pullback, however, may precede the next leg higher or the gains above $7,000 may not be sustainable in the short-term, as the 14-day relative strength index (RSI) is reporting extreme overbought conditions.
Also, it’s worth noting that BTC suffered a temporary price pullback from $290 to $220 in the four weeks following the bull cross in July 2015 before picking a strong bid.
That said, with the long-term technicals biased bullish, the historically strong support of the 30-day MA, currently at $5,463, could again reverse deeper price pullbacks, if any.
As of writing, BTC is changing hands at $6,800, representing a 7 percent gain on a 24-hour basis.
Analysts at Canaccord Genuity expect to see a little bit of history repeating.
In a research note sent to the investment bank’s clients Thursday, analyst Michael Graham and associates Matthew Volpe and Alexander Frankiewicz predicted a return to bitcoin’s stratospheric late-2017 high over the next 24 months.
Now four months into 2019, we note for the third time the striking similarity in bitcoin’s price action between 2011-2015 and 2015-2019. While this simple pattern recognition has little fundamental basis, we note that bitcoin does operate on a four-year cycle of sorts, as the halving of bitcoin’s mining reward occurs approximately every four years. Bitcoin has started to form the spring 2019 bottom we began mentioning last year, although a close look at the chart suggests the recovery may be slightly ahead of itself. Looking ahead, if bitcoin were to continue following the same trend, the implication is a slow climb back toward its all-time high of ~$20,000, theoretically reaching that level in March 2021.
The analysts also noted more movement in the crypto markets, saying that about “7 million bitcoins have been shaken out of ‘Cold’ (not active for at least six months) status and have begun trading hands again.”
Graph courtesy of Canaccord.
Since no one knows what the future holds, the analysts overlaid two past performances over each other, noting that with each halving of the block reward, the bitcoin price rose dramatically. The next halving is expected in 2020.
The team also points to increased Wall Street interest in cryptocurrency as a catalyst for price growth, writing:
Perhaps most important is Fidelity’s continued push into the space. After the asset management giant launched Fidelity Digital Assets last October and a custody service in March, numerous reports suggest the launch of an institutional digital assets trading business within the next few weeks. Fidelity also released a survey of 411 US institutional investors which found that 40% are open to owning digital assets within the next five years. Another factor may be Grayscale’s “Drop Gold” advertising campaign, which hit airwaves recently and targets digitally native investor base that may prefer bitcoin to gold as a non-government store of value investment. Yet another could be several corporate crypto initiatives from the likes of Facebook, Nike, and others gaining attention in the media.
The Cannacord analysts’ bottom line: It’s looking good.
“In any event, bitcoin is so far one of the best-performing assets of 2019,” they wrote.
- Bitcoin’s dominance rate has hit 8-month highs, suggesting investor confidence in the recent price rally.
- A test of highs above $6,500 seen in November last year now seems likely.
- Such a move, however, may be preceded by a pullback to the 10-day moving average at $5,633 if the immediate resistance zone of $6,055–$6,100 remains intact in the next 24 hours or so.
- The short-term bullish outlook would be invalidated only by a drop below the 30-day MA at $5,365.
Bitcoin’s (BTC) recent rally looks sustainable, according to the charts, and the cryptocurrency’s rising dominance rate suggests investors are bullish.
The price of a single bitcoin jumped to $6,099 earlier today, the highest level since November 14, according to Bitstamp data.
Meanwhile, BTC’s dominance rate, which tracks its percentage of the total cryptocurrency market capitalization, has also jumped to 57.14 percent, the highest for eight months, according to CoinMarketCap.
A rising dominance rate essentially means the demand for bitcoin is greater than the demand for alternative cryptocurrencies (altcoins) and suggests that investors are buying bitcoins for the long haul and not merely to fund altcoin purchases (which often can’t be bought with fiat).
Bitcoin price/dominance rate comparison (2019)
Bitcoin’s near 50 percent price rally from its April 1 low near $4,000 is accompanied by a rise in the dominance rate from 50 percent to the current 57.14 percent.
That essentially means the alternative cryptocurrencies have partly decoupled from BTC as investors buy to hold.
This is evident from the fact that the BTC-denominated exchange rates of major altcoins like XRP, cardano (ADA), tron (TRX), dash (DASH), NEO (NEO), zcash (ZEC) and others have hit 2019 lows this week.
Had the dominance rate stayed put, the recent rally could have qualified as a speculative bubble, i.e. investors rotating money out of BTC and into cheap altcoins in a bid to make a quick profit.
Such price gains are often short-lived, as seen in the chart below.
Bitcoin price/dominance rate comparison (April–May 2018)
BTC rallied from lows near $6,500 in early April 2018 to $10,000 by early March. During the same time frame, its dominance rate dropped from 45 to 35 percent. That divergence did not bode well for the price, which ended up falling to $5,800 by the end of June. Other corrective rallies seen in 2018 also lacked support from the dominance rate.
Bitcoin price/dominance rate comparison (2017)
A flow toward bitcoin is usually seen at the start of the bull run, as seen in the chart above. For instance, the dominance rate rose from 38 percent to 66.5 percent in the second half of 2017 when prices went from $1,700 to $20,000.
As a result, the recent rise in the dominance rate could be considered a confirmation of a new bull market. A number of technical studies have also echoed similar sentiments over the last few weeks.
BTC, therefore, could extend the rally toward $6,544 (Nov. 7 high), although a temporary pullback cannot be ruled out if the immediate resistance band of $6,055–$6,100 proves a tough nut to crack in the next day or two.
The above chart shows, BTC closed above the June 2018 low of $5,780 on Wednesday, invalidating the bearish candle created on a preceding day and establishing another bullish higher high above $6,000.
As of writing, however, the cryptocurrency is struggling to beat the resistance band of $6,055–$6,100. The cryptocurrency had clocked multiple daily lows in that range in September and October 2018. A break higher would further strengthen the bullish case, opening doors to $6,500.
Repeated failure at that resistance zone would validate an overbought reading on the relative strength index and allow a pullback to the ascending 10-day moving average (MA), currently at $5,633.
The bullish case would further weaken if prices find acceptance below the 30-day MA, currently at $5,365. However, the average has consistently reversed pullbacks since March and may hold ground again, given the long duration charts are biased bullish.
- With prices holding above Tuesday’s low of $5,687, bitcoin remains on track for a break above $6,000.
- Acceptance below $5,687 would validate the bullish exhaustion signaled by a “shooting star” candle that formed Tuesday and could yield a deeper drop to the 30-day moving average (MA), currently at $5,333.
- The case for a deeper pullback would further strengthen if the current 3-day candle ends below $5,510.
Bitcoin’s (BTC) bullish case is still intact after a pullback from 5.5-month highs, but prices must stay above key support at $5,700 to maintain that scenario.
The cryptocurrency market leader is currently trading at $5,820 on Bitstamp, down 2.5 percent from the 5.5-month high of $5,970 hit in the Asian trading hours on Monday.
Bitcoin, however, is still holding above the April 23 high of $5,623, meaning the most of basic of all bullish patterns – a higher high and higher low – is still valid.
The long-term bias also remains bullish, with the price holding well above the 21-month exponential moving average (EMA) at $5,296. So, the cryptocurrency remains on the hunt for a break above $6,000.
That said, BTC’s retreat from the 5.5-month high of $5,970 to close Tuesday (UTC) at $5,751 is telling a tale of temporary bullish exhaustion. These early signs of a trend change would gain credence if BTC find acceptance below Tuesday’s low of $5,687.
So far, however, sellers have not made their presence felt, allowing the price to hold above $5,687 despite a “large scale security breach” at Binance, the world’s largest cryptocurrency exchange by trading volume. The startup announced on Tuesday that hackers had stolen over 7,000 bitcoins and that users won’t be affected.
The series of higher highs and higher lows, ascending 5- and 10-day moving averages (MAs) and channel breakout on the relative strength index (RSI) seen above all indicate scope for a move above $6,000.
Even so, caution is warranted on the part of buyers as early signs of trend exhaustion have emerged on the daily chart.
To start with, BTC has failed four times in the last five days to close above the key resistance of $5,780 (June 2018 low).
Further, BTC created a shooting star candle on Tuesday, which occurs when a day begins on an optimistic note, but ends with sellers pushing the price back close to the day’s open.
That candle is widely considered an early sign of a bullish-to-bearish trend change when it occurs after a prolonged rally and its upper shadow is at least twice as long as its body. That seems to be the case here.
Traders, however, usually wait for strong confirmation, preferably in the form of a sustained move below the low of the shooting star candle.
As a result, the case for a rally to $6,000 would weaken significantly, and the prospects of a deeper pullback to the crucial 30-day MA at $5,333 would improve, if BTC finds acceptance below $5,687 in the next 24 hours.
4-hour and 3-day charts
On the 4-hour chart (above left), the Chaikin money flow index, which measures the money flow volume over a set period of time (usually 21 days) to gauge buying and selling pressure, is consistently producing lower highs, contradicting higher highs in price.
That bearish divergence indicates a loss of upward momentum, which is evident from BTC’s inability to produce a quick move above $6,000 despite the observed diamond-pattern breakout – a bullish continuation pattern.
A similar bearish Chaikin money flow and volume divergence are also seen on the 3-day chart. Further, it is worth noting that the previous three-day candle is a doji – another sign of bullish exhaustion.
The 30-day MA support at $5,333 may be breached if the current 3-day candle closes (Thursday, UTC) below $5,510, validating the doji candle.