As the Bitcoin price slides below the psychological $40k level, many are calling it the top. But is it too early to write off this rally?
Bitcoin is trading at $38,784 up $80.00, (+0.12%).
Cryptocurrency investors are watching BTC with bated breath to see how the market leader performs in the next couple of days.
On Friday, Bitcoin closed out the week at $42,450 following a 43%, 10-day rally. However, the price topped out over the weekend, and the weakness is bleeding into this week.
Coming into today, BTC had been on a 4-day losing streak and retreating 10% from Sunday’s high. This has left the market conflicted. The bears will point out the Bitcoin price has seemingly failed its biggest test of the recovery. On the other hand, the bulls would argue this is a healthy pause in the rally before the price increases again.
And both sides have a point. So are there any technical clues that lend weight to either argument?
The daily chart shows the Bitcoin price has been in consolidation mode following the May crash. A broad trading channel between $29,000 and $41,000 has dictated the range for the most part. This has created a perfect environment for range trading. Although, it has proved a nightmare for trend followers.
Last week it appeared that BTC had finally unshackled from this restrictive channel and was breaking out on the upside. However, the rally reversed at $43,000.
This is interesting for a couple of reasons. Firstly, it was within 2% of the previous all-time high in January and just 0.2% short of the march low.
The resulting decline has forced BTC below the 100-Day moving average at $39,723, which is clearly a notch on the belt of the bears.
Last week, the Relative Strength Index (RSI) had advanced into overbought territory, signalling a period of consolidation ahead. Although, the pullback has now worked off the overbought reading.
The immediate momentum is obviously negative. And that will remain the case as long as the Bitcoin price stays below the 100 DMA and the $43,000 resistance.
However, I’m not sure this predicts an imminent collapse.
Horizontal support is seen at around $36,000. And as long as BTC remains above $36,000, I maintain a positive outlook. This bullish view increases on a daily close above Sunday’s high.
However, this thesis becomes invalid if the price loses the $36,000 support. In that event, I will admit that the bears are back in control.
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