Bitcoin continues to show upward pressure

Alan Penny

21 May 2019

3 min read

Bitcoin did very little during the trading session on Tuesday, but quite frankly that’s a good sign. After all, we had shot straight up in the air recently and now it appears that we are trying to carve out a new consolidation area. A lot can be learned about a financial asset when studying its consolidation areas, as it shows you where potential order flow may be happening.

In this chart, I can see that the $8000 level remains significant resistance, and with good reason. It was structurally resistive and supportive in the past and of course is a large, round, psychologically significant figure. With that in mind, it’s very difficult to imagine that we could just slice rate through it like it wasn’t even there. What we are seeing now makes a lot of sense, as the market needs to take a bit of a breather.

Defined range?

bitcoin chart

Bitcoin/USD Chart

It’s quite possible that we are seeing the next consolidation range being carved out before very eyes. The $8000 level is of course obvious resistance, but at the same time the $7000 level looks to be significant support. Just noticed the last couple of trading sessions, as how we had bounced so significantly from the 7000 handle. It looks like we may be drifting back towards that direction, but quite frankly I would anticipate seeing a lot of buyers in that area again.

A lot of times, when you reach a parabolic market like this you see consolidation. That consolidation can be a couple of different things. The most obvious one is that the market is simply taking a breather after skyrocketing. That would make sense, it’s been such a strong move. However, there is the alternate scenario where it is what is known as “distribution.” Distribution is when people are selling and try to get out of the market. I do not believe that’s what we are seeing, I think it’s just simply the market is trying to build up enough momentum and inertia to finally break the $8000 handle.

Going forward

There are a lot of different reasons why Bitcoin may be rallying at this point. I suspect that the US/China trade war and the devalued Chinese yuan are underreported at this point. Chinese nationals are trying to get money out of the country however they can, which is no easy feat when there are capital controls. However, there are ways to get money out of the country via crypto currency, and I believe that is one of the catalysts. Also, global instability in general has people diversifying some of their assets back in the crypto.

Beyond that, things have just gotten oversold. Whether you believe in cryptocurrency or not, one glance at this chart should tell you that the buyers have come back in and have taken control. At the end of the day that’s all that matters, price. Buying dips should continue to work with a recognized floor at the $6000 handle underneath. It appears that the bear market has just died.

Written By
Alan Penny

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