TL;DR Positive for now, but it’s all about $6,800
After a long period of uncharacteristic stability, bitcoin is finally picking up. There are several reasons for encouragement, but a trend-change – a renewed bull market – is not certain yet.
On Wednesday bitcoin closed above the 50 daily MA for the first time in weeks. That area ($6,450) broadly lines up with a key support/resistance level, so remaining and consolidating above that will be important. For now we’ve dipped below that to $6,400, coming off the 50 and 200 MAs (which have just crossed bullish) on the 4h chart.
We have broken through the descending resistance line that has been in play since February. Bitcoin has tested this multiple times, as it has tested the $6,000 zone.
Volume is coming back in. It’s nothing like it was at the height of the rally or earlier this year, of course – but it’s picking up.
Bitcoin dominance is down. This is something that die-hard maximalists will view as a bad sign. For us, it’s a signal of strength for the overall crypto market. In a bear market, traders seek safe haven in BTC, assuming they don’t exit to USD altogether. This is why alts have typically fallen ~90% while bitcoin is down ~65%. When confidence returns, traders buy alts – pushing those thinner markets higher and reducing dominance, but indicating in the process that crypto is overall attractive.
For all that, bitcoin is still in a range and we know that $6,800 represents critical resistance. BTC has traded around that area enough in the past that it will necessarily be a key level in deciding trend. It may take a couple of goes to break that, if indeed the market decides that’s where it wants to go.
Additionally, bitcoin shorts have dropped to a three-month low against longs. This is not conclusive evidence of anything, but we take it into consideration. Longs have not picked up appreciably in cash terms. Remember that the herd is generally wrong. When shorts are high we often see a move to the upside, clearing them out. We’ll be watching this to nuance any technical analysis. Finally – and this will feel like Groundhog Day to anyone who’s been around since 2014 – China has just unbanned bitcoin. Again.
To summarise, passing $6,800 will be interpreted as a sign of strength, and many traders will be waiting for this point or $7,000 before buying.
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