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Inferno Friday market report

Inferno Friday market report

Analysis

Bitcoin has steadied after its recent falls. We explore what might happen next.

 

There’s no denying that bitcoin has had an outstanding year. After 2018 proved so miserable, this year has been quite the opposite, with bitcoin almost tripling from its December low to hit $9,097 (Bitstamp) last Thursday.

 

However, $9k was immediately rejected, with bitcoin crashing lower in two waves – the first to the support zone at $8,000 and then, after a recovery, a further drop to a local low of $7,433. At the time of writing, bitcoin has again stabilised around $7,800.

 

Volumes have dropped off and RSI is neutral on the 1h, 4h and 1-day. On the weekly, it is still only just coming out of the overbought zone – several weeks of strong action has that effect.

 

Looking at the 1-day, BTC has found support at the $7,600 region. The 50-day moving average is also moving upwards quickly, currently around $7k. That tends to act as support in a bull market. (The 200-day MA is still far down below $5k, but has started to curve upwards.) Having seen our golden cross at the end of April, a retest of the 50-day MA would be reasonable. That may not require further falls in BTC; it may be enough to hold the current range while the MA continues to rise.

 

The question is whether bitcoin is now consolidating before recovering $8k – and beyond – or whether this is a temporary pause before another fall, likely down below $7k. The next major support is around $6,800. This was the top of the band where BTC traded for months in 2018, and lines up with the 38% fib level from the December low to the May top. Fibonacci levels overall line up very well with known support; the 23% fib coincides with $7,600, where we recently found support, and the 50% fib lines up with $6,100, at the bottom of that zone of activity, and where BTC flash-crashed in May.

 

A larger pullback might be expected, since parabolic rises almost always give up the majority of their gains. However, sentiment is stronger about bitcoin than it has been for almost two years. All we can say at this point, is that if BTC breaks one zone of support, the next one should be clear thanks to the multiple different indicators that come together: $7,600, $6,800, $6,100.

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