Bitcoin broke a strong resistance line that had pressured the price to stay under for almost a year. This has caused some to speculate that Bitcoin might have started its bull run. The price of Bitcoin was $4,011 and the market was at $71 billion, at press time. The 24-hour price change showed a surge of 3%.
Rising Channel/Ascending Channel
The 4-hour and the daily chart of Bitcoin showed the formation of a rising channel pattern, which is similar to the one that was formed in December 2018.
The Rising Wedge usually presents a bullish buying opportunity by definition, but current conditions under which the pattern has formed indicates that Bitcoin will perform a contradictory move leading to a price dump. There are three conditions that support this theory of price dump.
- The declining volume.
- A strong declining resistance line that Bitcoin has respected for more than a year.
- The 20-weekly moving average [140-day moving average] provides yet another strong resistance for Bitcoin.
Rising channel or Ascending channel usually provides a bullish buying opportunity, but the declining volume at the breakout point must be high, which is a criterion for the pattern; but the 4-hour chart and the daily chart show that the volume is in a declining trend. However, if there is a sudden surge in volume, then the price might break to the upside.
In addition to the declining volume, a resistance line has been keeping the price of Bitcoin under since February 2018. Although Bitcoin breached it momentarily, the candle is yet to be closed. The price could be testing the resistance and only time will tell if it will actually stay above it.
The 20-weekly moving average or the 140-daily moving average is also serving as resistance. Similar to the declining resistance, Bitcoin breached this line and might be testing it.
Supplementing the above conditions, the 4-hour chart presents resistance at 3 important levels: $4,060 to $4,100 and $4,400. Even if the price decides to break the rising wedge in a bull trend, it would be rejected at these above-mentioned levels. If the price remains above these key levels, then it can be argued that Bitcoin has started a new bull rally.
Bitcoin is still supporting the 200-weekly moving average, but the 20-weekly moving average and the 200-weekly moving averages are converging with each passing week. The price broke the 20-weekly moving average consistently for the second week. However, the volume is minimal, indicating that this move might not hold.
Additionally, the volume has consistently declined, but the price has increased; this is a classic divergence move, which will not hold for long.
The Stochastic RSI showed that it has hit the top/oversold zone. The Stochastic and the signal line showed signs of a bearish crossover, since there is no room at the top and hence, the only way it can move from here would be to the bottom. This would mean that the price will also decrease.
The price of Bitcoin is currently testing resistance in every possible scenario. If the price holds above key resistance levels, this could be a sign of Bitcoin’s bull run. However, this scenario is less likely, as other aspects of Bitcoin indicate a contradictory view.
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Akash is your usual Mechie with an unusual interest in cryptos and day trading, ergo, a full-time journalist at AMBCrypto. Holds XRP due to peer pressure but otherwise found day trading with what little capital that he owns.