Bitcoin has found support at the $7,800 level, but the medium-term direction is unclear.
In a strong finish to last week, bitcoin ended Sunday at $8,300 – very close to its year’s high. This unexpected close meant gains of around $1,200 for the week, about the same as the week before. This bullish move might take BTC up to the $9-10k region, but there are equally factors that suggest the momentum might be dissipating and it might finally be time for the correction.
Any parabolic move like we have just witnessed should lead to a pullback: the market is too over-extended and overbought, and there is simply too much risk involved in being a buyer. Traders naturally take profits, which results in at least a short-term dip. In this instance, the move up to $8,300 also describes a double top. At the very least, we have established clear resistance at $8,400, and it will take an extra push to break through that.
RSI on the 4h is drifting back to the median, 50, while on the daily it is only just dipping out of overbought territory. On the weekly, RSI is still above 70, also suggesting it is time for a pullback. While in a bull market, weekly RSI can remain above 70 for weeks at a time, this is the first time that it has touched 70 since the peak of the bubble in December 2017. It’s likely that this time, it will be a little more tentative – touching 70, backing off, and then pushing higher again. As ever, 2015 offers an interesting precedent (though history does not always repeat itself exactly). In November 2015, weekly RSI climbed above 70, dipped and then recovered above 70 again, ultimately then staying above 50 until the bubble burst.
That would be a good scenario here. Any market that overextends too fast is liable to turn bearish, and it is surprising that we have not seen a major correction yet – especially given the news that the SolidX-VanEck ETF has again been postponed. This was likely priced into the market, though there had been some expectation of a different outcome this time.
For now, we can see that the dips are being bought in the $7,700 range. On the recent crash, the 50-week moving average held. All this is bullish – but we need a push higher into the $8,500 range to confirm that. In the immediate term, sideways trading and consolidation would be positive.
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