Nine weeks and still ranging is not what Bitcoin enthusiasts had been hoping for, but the leading cryptocurrency has not necessarily backed away from volatility. When other assets are range-bound, it is typically a tight range. One could make the argument that BTC is held captive by “tightening” boundaries, since its price behavior is now between $9,500 and $12,000, $9,500 and $13,800, if you go back to mid-July. Every time Bitcoin has tried to push higher, it has been beaten back, but $10,000 seems to be the “floor”, the point where buyers leap to buy at seemingly depressed prices, in their opinion.
In the above daily chart, courtesy of Coindesk, the $10,000 support level appears to be visually and intuitively obvious. Recent price action has refused to go below the 100-Day Moving Average and stay there. The long wick or shadow on the last green candlestick made for a very nice “Hammer” formation, a signal of an impending reversal, following the “Bear Cross” directly above it, when two short-term moving averages crossed. This Hammer was not the first to appear over the past nine weeks. There have been three others, and each time the follow through was a reversal, as noted on the chart.
Where do we go from here? The Bakkt crypto exchange was finally given a green light from the CFTC to launch in September its program and product offering of “physically” settled BTC futures contracts. This event has been heavily anticipated and could be the reason why weekend trading has been so supportive. Recent recession fears had sent investors packing at the end of the week from equities and cryptos.
Capital flight was in abundance last week, but apparently, investors, who had favored Bitcoin for weeks under such pretence, were nowhere to be found. Thomas Lee, a Bitcoin bull and Co-Founder of Fundstrat, eschewed investors for their short-term thinking. His opinion is that correlations built over months at a time can still reverse for no reason in a panic. He takes a longer view, and he has often cited the fact that Bitcoin prices have tripled this year, while equities have not faired nearly as well. A smart investor would have chosen Bitcoin as a likely “diversification hedge” in a heartbeat.
From Lee’s perspective, Bitcoin will appreciate handsomely over the remainder of the year, although he is not making any specific price predictions. What he shared with ccn.com was:
I think it’s going to be much higher by the end of the year and potentially at new all-time highs. I think anyone who wants to have a 2 percent or 1 percent allocation to bitcoin as a hedge against a lot of things that could go wrong it’s a smart bet.
But why can’t Bitcoin bust through $13,000? The current consensus is that there are three reasons likely holding the digital asset from flying upward. A host of analysts have contended that BTC could stay range-bound for months, since no new major event is on the horizon. These analysts point to the halving event in May of 2020 as crucial. There is also news that crooks behind a Chinese Ponzi scheme are “incessantly dumping” 100 BTC on the market in an effort to liquidate their $2.9 billion in ill-gotten gains.
Lastly, analysts have noted that “gaps” appeared in CME traded futures around the $8,000 price range, which could be significant. Gaps have always been “filled’ on the CME or in the market, which gives credence to this theory. On the other hand, the CME is closed on weekends, when many BTC rallies have taken place. The gaps in question were created because of this lack of being open and may not have the power of past “fillings”. When ranging persists, however, the breakouts tend to be powerful in either direction. Caution is advised.
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