Bitcoin narrative in flux – Will $8,500 be firm resistance or will bulls run?


Bitcoin retreats after Facebook announcement and stock market gains

As has been the case many times over in recent months, Bitcoin analysts are in a quandary about what will happen next. There is firm agreement that nearly a dozen fundamental factors are converging in such a way as to create a “Perfect Storm” of sorts, the reason many use to explain Bitcoin’s “parabolic” trend line that has taken over since April in earnest. Several analysts have been so bold as to hearken back to a similar trend line shape in 2017, when speculation mania drove prices through the roof. This time around, however, a bit of trepidation is in the air. Cautious steps are now advised.

On the one hand, a subset of the analyst community firmly believes that the next move for Bitcoin is to assault $9,000, with $10,000 not too far out in the future. Other analytical types are certain that the rally has been too “parabolic”, almost asymptotic, and, under these conditions in the past, every other asset known to man has collapsed. If that word is too harsh, then a modest correction is in order – pick from 10% to 30%, depending upon your own assessment of where we are and how we got here.

At this stage, we have to rely on price action in the market, the final arbiter of truth in any financial market. For two weeks, BTC has hovered between tight boundaries, $8,500 on the upper end and $7,500 on the lower. It has hugged the upper Bollinger Band for most all of May, until one recalcitrant trader dumped a 5,000 Bitcoin sell order on the Bitstamp exchange last Friday in a move labeled as a blatant attempt at price manipulation. After falling below $7,000 for a brief instant, it rebounded back toward $8,000 once more.

The $8,500 price point, however, has already proven to be a formidable barrier. Over the last eight days, Bitcoin has peeked over $8,300, only to be driven back. When May commenced, the sky was the limit. $10,000 did not seem to be so “irrationally exuberant” anymore. The narrative now is changing. There is consensus that Crypto Winter is a thing of the past, never to be revisited again, unless you are among the most diehard of critics. The official bottom of support formed in late December, roughly at $3,150.

The question now being asked is whether there has to be a major correction before Bitcoin can resume its assault on $8,500 and then $9,000 and beyond? It has only been six weeks since Bitcoin was treading water around $4,000, but no one is predicting a fall to that level. One respected crypto trader, Josh Rager, has tweeted both a bullish and a possible bearish scenario for Bitcoin over the coming weeks. He is in the camp that expects a material pullback at some point, his low point being in the $6,000s..

Do you recall the “Pole and Pennant” formation in early April? The same pattern seems to be forming in May, which could be a good or bad thing, depending on which line of the converging triangle is penetrated going forward. If BTC breaks through the lower boundary, the “30% pullback theory” becomes top of mind. Does Rager buy into this argument? In Rager’s own words: “Yes, eventually. If history repeats, there should be plenty of strong pullbacks on the way to the next peak ATH [All Time High]. There were at least nine 30%+ pullbacks from last cycle accumulation & uptrend.”

Rager also noted that in the current bull run, there has only been one 26%+ pullback, and that data point only occurred on a few exchanges, when the alleged price manipulation tactic was in full flower. Why are pullbacks so important? Pullbacks are typically profit-taking sessions, where a portion of investors get off the “train”, while a newer subset buys in, believing that higher prices are in the picture, thus broadening the breath of market participation. Such actions are perceived as healthy for a market.

Elliott Wave Theory enthusiasts are adamant about this very point. They have observed three major waves in the latest appreciation phase from their unique perspective, and they expect another two waves to form, which cannot happen without a pullback. They also see warning signs at this stage, which have not assumed the severity of “alert” status. Caution is their watchword at this time, similar to buckling up before the turbulence that will come with the next bullish trend.

 

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Bitcoin narrative in flux – Will $8,500 be firm resistance or will bulls run?

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