Bitcoin (BTC) price has had a volatile start to the week. Asia kicked off the trading week with a 4% selloff that brought Bitcoin price from $8,050 to $7,700. The ball was then passed to the Europeans who started a rally which continued through to the New York trading session. By the end of the day, Bitcoin had rallied 8% from the bottom to highs of $8,325, which was near a 3.5% gain for the day.
Altcoins have also been moving higher on the same basis, with Ethereum and XRP being notable gainers of 6% and 9% respectively.
The crypto market has largely been following the risk-on price action today, with traditional markets moving higher and commodities moving lower. We will take a closer look at the key timeframes to try and examine if Bitcoin is nearing a bottom.
Daily Crypto Market Performance. Source. Coin360.com
Weekly Bitcoin price chart
BTC/USD Weekly Chart. Source: TradingView.com
Bitcoin closed the week decisively bearish, breaking and closing below the 20-week moving average (WMA) for the first time since breaking earlier in March. This was of particular note given that this is something that did not occur in 2016/2017 and is typically seen as being a very bearish indicator on the weekly chart.
Despite this, Bitcoin has returned towards the weekly support at $7,600 and is in the proximity of the 61.8% retracement of the 2019 run-up. This is also a key area for Bitcoin and should act as an intermediate support. At the very least it is an ‘auto-buy’ zone for many investors.
It remains to be seen what the real market sentiment is. Bears will see the 20 WMA as lost, and the descending triangle breakdown could be interpreted as a sell the rally scenario. Meanwhile, the bulls will see the retracement into support as being a buy the dip opportunity, so it is unsurprising that Bitcoin is experiencing volatility.
Daily Bitcoin price chart
BTC USD Daily Chart. Source: TradingView
A closer look at the daily chart reveals that today’s drive lower was bought up very swiftly demonstrating a swing failure pattern (SFP) which occurs when new lows are made but the candle closes higher than the open. This is typically a bullish indicator and once the daily closes and confirms this to be the case, it may see some continuation as a result.
Bitcoin has been stopped dead at the 200 daily moving average (DMA) which was lost last week and now acts as resistance. If the bulls can break this key level and find support it will go some way to confirming that the bulls are back in business.
Despite the bullish start to the week, it’s important to note that the bulls must regain the 200-DMA quickly.
Looking at the order book can be of some use as it helps to determine if there is any pent up demand. It can be somewhat misleading as large traders are unlikely to ‘show their hand’, but generally speaking it is useful to see if there is growing demand versus supply.
Combined Bitcoin Order book. Source: data.bitcoinity.org
Looking at the books, there is clear buying interest at Coinbase, Bitstamp, and Kraken, all of which are notable fiat onramps. Market participants rarely get what they desire and with the narrative of many being that they are looking to buy the weekly support or the 61.8% retracement in the low $7,200s, it could be that the opportunity simply gets front run. Time will prove to be telling this week, with the initial objective for the bulls being to regain the 200-DMA.
BTC USD Daily Chart. Source: TradingView
Bearish scenario
While Bitcoin is off to a good start to the week, there is still the possibility that the 61.8% retracement fails and sellers pile on in significant size. There is also some confluence at the 78.6% retracement at $5,400 which aligns with the descending triangle breakdown measured move and the next high volume node for 2019 which is also in the vicinity of the 200- WMA.
As it currently stands, many investors refuse to believe that these levels could be revisited and it would be seen as unprecedented in a Bitcoin bull market. With that said, it’s still worth bearing in mind.
4 Hour Chart
BTC USD Daily Chart. Source: TradingView
The 4-hour chart illustrates that Bitcoin rebounded off lower lows into the 200-DMA and off the back of a bullish RSI divergence. A bullish divergence occurs when price makes lower lows but the oscillator makes higher lows.
Today’s rebound is coupled with a low timeframe W-Bottom pattern, which nicely coincided with the 200-DMA resistance. If this is broken, the bulls will target a move higher towards $9,000 which will be a critical level for the bulls to break.
The prior multi-month support in the $9,000s will be a tedious task for the bulls to overcome should they make it to those levels. A rejection would most likely set the tone for a move to retest the $8,000 level once more.
Looking forward
Overall, the Bitcoin market is in a state of uncertainty. There is clearly buying interest in the low $7,000s, but the weekly timeframe illustrates a critical technical breakdown. It is likely that there will be significant volatility ahead given the situation.
Bears will be looking to aggressively short bounces and bulls are appearing to be patiently waiting to buy the dip.
If the bullish buying is to be exhausted and absorbed by the bears, there will likely be continued downside. As the block reward halving looms, miners might begin sweating as the higher cost of production could result in lower realizable marginal revenue.
What is certain is that the next couple of weeks will be decisive for the remainder of the year and possibly longer.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.