Welcome, all to What is happening with Bitcoin? I’ll be releasing a weekly analysis on bitcoin focusing on important price levels and bitcoin’s outlook for the upcoming week. This article is for you if:
- You are a crypto enthusiast and want to learn about the world of trading analysis
- You want to learn more about market dynamics and the crypto sphere
- You are thinking about buying or selling crypto in the next weeks
This analysis will be focused on Technical Analysis. Technical Analysis is a technique used by traders to identify trends from price action. Essentially, you collect price data to construct technical indicators to forecast a price chart outlook. Technical analysis is only one part of many factors that drive the price. Especially in crypto, there is a huge community factor, legal regulations, the macro environment (stock market, world politics, …), on-chain analysis, and technical issues (51% attack, hacked exchanges,…) that can cause panic or excitement in the market.
One basic part of technical analysis is the support and resistance level. These are significant price levels that act as barriers because bitcoin can either revert or pause at the said level. You can use these barriers and try to better plan your buy and sell actions. Opening a position in the middle of the range (between support and resistance) is often not the best strategy. Be patient, set an alarm at support and resistance, and remember to buy at support and sell at resistance.
Where are we now and what happened last week with Bitcoin?
Crazy week for bitcoin! After a failed attempt at $10,800 (Monday’s resistance level), bitcoin dropped to retest 10.5k, reclaiming its significance as a price level. Bitcoin slowly recovered, until Thursday that buying pressure increased as Square acquired $50 million worth of bitcoin. Volatility continues to drop, however short-term we are exposed to abrupt price movements as volume continues to decrease. Today, the euphoria continues as bitcoin is retesting the new resistance level at $11,187 (weekly resistance level). If we get rejected again, expect bitcoin to retest $10,947 (weekly support).
What happened outside of crypto?
Uncertainty rattled bitcoin this week as BitMEX (major exchange) was indicted by the CFTC and UK’s Financial Conduct Authority (FCA) bans the sale of bitcoin derivatives to retail investors. Yet, bitcoin’s performance moons that of equities and the precious metal (Bitcoin + 54% YTD). Systematic risks caused the markets to tumble as the 2020 US Elections are coming up and President Trump tests positive for Covid-19. Furthermore, macroeconomic indicators continue to signal pandemic-driven economic deterioration. We might have disrupted the sideways trend, but more risk is yet to come.
Where is bitcoin going next week?
To get a picture of where bitcoin will be trading next week, we need to use two timeframes to see if bitcoin continues to trade above our long-term support (bullish sign) and where the short-term trend sees bitcoin this week.
Long-term, market sentiment shows that bitcoin’s outlook remains bullish because the increase in demand has driven the price within the 11k range. Bitcoin’s network increases supporting our hypothesis on a greater demand. Therefore, it’s likely that bitcoin will continue the streak (75-days and counting) above 10k and move towards $11,420 (monthly resistance level).
When we zoom in to a higher frequency chart (4-hour chart) we can see that bitcoin’s volatility spiked causing a trend of bullish flags. It’s too soon to tell if bitcoin is going to consolidate within $10,947 and $11,187 because volatility remains low. The latter implies that if bullish sentiment persists, bitcoin is going to continue gaining without major hiccups along the way. However, Square proved that it takes one big whale ($50 million worth of bitcoin) to move the market. Who says big players won’t take advantage of FOMO and euphoria and sell at resistance?
Next week’s trading channel is to be defined over the weekend, if bitcoin continues to consolidate, we expect bitcoin to trade between $10,947 and $10,1187. If you want to keep an eye on bitcoin’s progress, set alerts at the following significant price levels:
- Resistance $11,187
- Support $10,947
As bitcoin remains within our range, we can continue to enjoy our weekend.