It’s been quite the week, but the big question is, of course – what next?
Bitcoin made incredible gains this week, surging over $1,000 to hit a high of $5,345. Not only was this a huge rise in its own right, but it was a landmark moment in the bear market: this was the first convinving higher high bitcoin has posted in over 15 months. It was the first indication that the bear market might be over. But it is a ‘might’, because the end of this story has not yet been written.
Bitcoin was hugely overbought, with the RSI well over the 70 mark on almost every timeframe – and over 90 on some. A correction was highly predictable and likely: after such a frenzy of buying, profit-taking is to be expected. Consequently the price fell by $500 to put in a local low around $4,800. The 1-day chart displays a rather bearish doji candle, and bitcoin struggled to hold $5,000. At the time of writing, the price sits at $4,940.
Many metrics unsurprisingly point to overbought conditions. These include on-chain metrics like NVT as well as technical indicators like RSI. (NVT Signal hit 155, which can be considered into overbought territory.) But there’s no underplaying the significance of that move.
So, what next? Is this a bull trap, before another leg downwards? Is this the top – or near the top – of an Elliott Wave 4, with a final 5th wave to come?
At the very least, technical analysis would suggest we need to retest $4,200, the zone of the breakout; old resistance should become new support if this move is to continue. That may not happen for a while but it would be characteristic of the market if it did. Despite the fact that $4,200 still lies over $600 to the downside, consolidating above that would actually be bullish.
Meanwhlie we now have resistance at $5,000. Should bitcoin’s price break above that again, we have a zone of interest around $5,500. Then, of course, there is the ultimate barrier to overcome: $6k, which proves such strong support on the way down.
If $6,000 is broken and price consolidates above that, the bull market is definitely on.
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