Bitcoin - BTCUSD
The Bitcoin price has again failed at the $40,000 barrier. As the current momentum wains, I wonder if a larger decline may be in store for BTC.
A week ago, the Bitcoin price collapsed. BTC slid through the support of the 200-day moving average at $39,995 before tumbling to an intraday low of $30,000.
The naysayers were vocal in their view that it spelled the end of the cryptocurrency market.
BTC’s swift rebound from $30,000 to $42,600 swung the bragging rights back in favor of the bulls.
However, the recovery again failed, and the Bitcoin price reversed lower, bottoming out at $31,100 on the 23rd of May.
Another bounce followed, but the 200-day MA capped this rally at $40,630. BTC is now 7% lower at $37,756.
Until the price can convincingly clear the 200-day average, there is a danger that it once again reverses lower.
Bitcoin is the marmite of assets. In one camp, you have the ‘maximalists’ who believe BTC is trading at a fraction of its future price potential. Furthermore, they see a future where Bitcoin holds reserve currency status.
The other camp is the non-believers. They view cryptocurrencies as nothing more than a fad and believe the assets hold no intrinsic value.
This can create great trading opportunities for contrarian traders. As the market runs higher, the bulls, afraid to miss the next huge rally, chase the gains.
This leaves the price prone to a pull-back.
The resulting reversal encourages ‘I told you so’ selling from the bears. This time the price over-extends to the downside. This also leaves the price prone to a pull-back but in the other direction.
Since the initial drop on the 19th of May, the Bitcoin price has reflected this trader mentality. This leads me to think that we may be in store for a reversal after the recent rally.
The potential target on the downside is an ascending channel in place from the 12th of May. The line at $33,000 was previously a good area of resistance and, later, support. Therefore this is an important level to watch.
However, the price will break free of the wide $30,000 – $40,000 range at some stage. On this basis, a close above the 200-day MA at $40,745 would negate the bearish projection.
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