So far, so good: Bitcoin has been breaking highs over the past two days, currently trading just below $11,000.
As stated here before, Bitcoin’s price movements are very unexpected. There was no analyst out there who could have declared that Bitcoin’s bottom was indeed $3,000 back in December 2018. And no analyst could have expected that before mid-2019, the price of the primary cryptocurrency would return to a 5-digit number.
However, there is always a bearish aspect to the story. As we have learned from its short history, when Bitcoin goes parabolic, we can expect to see a sharp move to the other side.
To wit, after losing more than 80% of its value during 2018, Bitcoin saw a series of price spikes in the first few months of 2019.
Two Directions, Two Thoughts
As of press time, Bitcoin looks destined to continue higher. However, the bulls wouldn’t regret seeing a healthy correction soon.
As can be seen on the daily chart, the bullish move from $7,500 to the recent 2019 high of $11,200 hasn’t led to a significant correction.
In my opinion, there are two scenarios right now: The first is that Bitcoin has formed a double-top pattern around the high of $11,200 (see the 4-hour chart). A double top is a bearish formation which leads to a necessary correction. This is supported by the following two significant statistics that have reached resistance levels: Bitcoin’s market cap ($200B) and BTC dominance (60%).
The second scenario consists of breaking above the current high, followed by a decent amount of volume, to continue this impressive bull run.
Total Market Cap: $326.5 billion
Bitcoin Market Cap: $193.3 billion – very close to $200 billion. The 2019 high stands at $198 billion. Watch closely.
BTC Dominance Index: 59.2% – very close to the 60% resistance on the dominance chart.
Looking at the 1-day and 4-hour charts:
Support/Resistance: If a correction were to take place shortly, then we would expect these levels to be associated with a healthy correction: $10,300 (Fib retracement level 38.2% on the 4-hour chart; this is also Bitcoin’s current low after breaching $11K for the first time), $9,800 (Fib retracement level 38.2%, 1-day chart) and $9,400, which is the prior high. Below $9,400, the bullish momentum could get delayed a bit.
From the bullish side, in case BTC manages to overcome the current high around $11,200, then the next significant resistance area would be around $11,500 – $11,600, which is the high from February 2018. Further above lies the $12,000 level. Above $12,000 and the move could get out of control. We all remember how quickly Bitcoin captured $20,000 back in 2017 following the break of $12,000.
Daily chart’s RSI: The RSI has also broke above 70 and has been facing the 80 level for the past three days. So far, the RSI has proved bullish. However, one concern is the divergence in the RSI on both the daily and weekly charts. In order to see the bullish momentum continue, the RSI will need to follow Bitcoin’s price chart in creating higher highs. Another item to note is that the Stochastic RSI of the daily chart is stretched out to the overbought area.
Trading Volume: Yesterday’s volume was huge, even though it was the weekend. The buyers have returned. It will be interesting to see whether a correction is followed by a lower volume of sellers (healthy) or if a breakout surpasses the current volume records.
Bitfinex open short positions: The amount of open short positions are gaining momentum along with the rising Bitcoin price. There are now 29.1K BTC worth of open short positions. This is their highest level since May 11.
BTC/USD BitStamp 4-Hour Chart
BTC/USD BitStamp 1-Day Chart
Cryptocurrency charts by TradingView. Technical analysis tools by Coinigy.