Bitcoin Price Surges 40% in a Month and Does not Look Like Stopping Anytime Soon

The Bitcoin price has taken everyone by surprise by surging more than 40% since my last blog in the first week of May (available HERE). However, if you follow my blogs you would know I was anticipating a similar move as everyone was expecting a pullback where they would be able to buy. The exact words from that blog are "I have been watching the sentiment of this market which is expecting a pullback and thought to myself what if Bitcoin surprised everyone and just exploded upwards before retracing". A month later and almost 3000$ higher in Bitcoin price, I will focus on whether and how the conditions have changed, analyze Bitcoin as well as the altcoin market and give my opinion (based on technical analysis) on what the potential targets to the upside and the downside are.

Before reading the rest of the blog, I would like you to answer this question: Should this rally be over already, at what price are you prepared to buy Bitcoin? Is it at the 7300 support? Down at 6000$, which has been the most important level for Bitcoin for the whole last year? Or do you expect a complete collapse of the price towards 4000$ and lower? I would love to hear your thoughts so please leave a comment bellow.

In the next section we will take a look into my opinion on where the support for this Bitcoin bull market may be found if a top has already been set at 9000$.

 

Potential support targets

Throughout this rally which is effectively going on for 4 months now, we have seen quite a lot of strong pullbacks. These pullbacks on the Bitcoin price, as well as in the altcoin market, have on several occasions been brutal and scared a lot of traders away, giving hope for those waiting on the sidelines that the correction may come after all.

However, even after declines of almost 10% in the Bitcoin price in the last 30 days, the bullish picture (so far) remains intact. We have found support at the 21 day EMA (exponential moving average), which (as I keep mentioning in my blogs) is one of the most important indicators to keep an eye out when playing these moves. During the last 5 days, the market dropped 15% all together and we have seen panic once again. Despite the strong decline in price of Bitcoin, the market found support and is currently trading right on top of the 21 day EMA.

The fear and greed index fell all the way from 72 to 42, signalling many have left the market or have been liquidated and are expecting a further pullback. Let's first take a look at what is expected to happen, should the EMA fail to hold.

 

Bitcoin finding support on the 21 daily EMA

Bitcoin price finding support on the daily EMA (orange line)

Even though I believe this scenario to be less likely (and later I will explain why), if the daily EMA line does not hold, we may be due for a first big correction ever since we capitulated in the last quarter of 2018. Even though there are price points which have provided significant support during this rally (such as 7300, where we saw 5 daily candle closes), I would be looking to buy Bitcoin at levels which have historically proven to be conformations for a start of a bull market. Another possibility is a big, fast shakeout before continuing the rally upwards, as if we do continue to the upside, I believe the next move might be very strong, so it is in the interest of the whales to get rid of as many traders as possible before surprising everyone and force them to buy back in for 10000$ or even more.

As explained in the previous blog, the 2015 bull market (along with many others) started once we broke the 21 weekly and monthly EMA and held those lines as support after the first correction. We have seen a break of those levels to the upside in April 2019, indicating that the bull market may already have begun.

However, when the Bitcoin price makes a strong correction, I will be mostly focused on buying at the 21 weekly EMA, as an entry at these levels would be optimal for the continuation of the rally on the macro-scale. Currently this support line stands at exactly 6000$, which coincides with probably the strongest support in Bitcoin history, which held the price several times in 2018 before being broken, resulting in our capitulation.

21 weekly EMA (orange line) acting as resistance throughout the 2018 bear market, now expected to act as support to confirm the bull market

21 weekly EMA (orange line) acting as resistance throughout the 2018 bear market, now expected to act as support to confirm the bull market

We will continue this Bitcoin analysis with a different scenario, which I personally believe is a bit more likely to happen. Of course, for this scenario to play out, the Bitcoin price has to start trading above 8000$ again, confirming the 21 day EMA as support once again.

 

People waiting for a drop that never comes?

Compared to what we have talked about in our last blog, I still have a similar theory that is more or less based on my observations of the market sentiment. I believe many are still waiting on the sidelines for a correction down to our support lines, and are fearful to stay in the market while it is showing signs of a top.

Some of these people have been waiting for the correction ever since the 1000$ candle upwards back in April 1st, when the 5000$ level was reached. It was quite unlikely for the price to keep on going through important resistance zones, but as we now know, not only was the 6000$ resistance defeated, Bitcoin continued its rally much, much higher.

My theory (and it is only a theory) is that the first big correction which will liquidate many and scare many more away, will take place after these players step into the market. After their mentality changes from "ehh I will buy when we drop to 6000$, the conditions are way overbought and we need to go down from here sooner or later" to "WHAT IS HAPPENING EVERYTHING IS RISING SO FAST, I MUST GET IN NOW OR I WILL MISS IT!". Only when the real FOMO (fear of missing out) kicks in, I will be convinced we are due for a larger correction. This could be achieved by releasing some important news such as announcement of Bakkt launch, ETF approval etc.

 

Altcoin market not as strong as Bitcoin

Despite significant gains in the altcoin market in the beginning of the year where top alts such as Litecoin and Ethereum made gains of over 200%, the volatility for these coins has stabilized in the last month even though Bitcoin rally continued strongly during this period. This resulted in an increase of Bitcoin dominance against other coins all the way from 33% in January to 58% just a week ago (source: https://coinmarketcap.com).

Altcoins are still, more or less, price-wise moving in the same direction as Bitcoin. This would mean that if the Bitcoin price has already topped and we go into correction mode, which could in theory result in a drop of a further 25% (while still remaining bullish), I would rather not even imagine how hard of a decline that would mean for altcoins. More importantly, crucial bullish structures for those coins could be broken in that scenario, decreasing a bullish scenario all together in the markets. This, combined with the previously described market sentiment/mentality and my belief that an alt-season is still to come, is why I am convinced that the parabolic rally might still contain some fuel.

We have seen some alts perform quite well during this dump, specifically Litecoin (LTC) which has held its support at 100$, ignoring the further decline in the Bitcoin price. As LTC is forming an extremely bullish cup and handle pattern (which we analyzed here: https://www.tradingview.com/u/CryptoLifeStore ) and is approaching its halving event, I would like to focus a bit more on this cryptocurrency and show you what happened during the last halving for LTC.

 

Litecoin halving 2015

For those unfamiliar with the term halving, it is an event that occurs every now and then among different minable cryptocurrencies, such as Bitcoin, Ethereum, Litecoin. At the event, the mining rewards are cut, meaning less coins are being produced (instead of 25 LTC, miners will now be rewarded half that, 12.5).

This usually has an effect on price; first when everyone is talking about how it will effect the price (usually followed by a dump - buy the rumour sell the news), and secondly after the dust is settled when it shows its actual impact. The next LTC halving is only 2 months away, while the last one took place 4 years ago, in August 2015.

Let me show you the price action for LTC during the last halving event.

 Weekly candle chart for Litecoin, 2015-2016

Weekly candle chart for Litecoin, 2015-2016

As you can see, in June 2015 the price of Litecoin stood at exactly 2$. Just a month later, in the first week of July, it surged all the way up to 5$ (150% gain) with a wick going up to 9$, which is 350% higher than the starting point. As you can see, it then dropped as halving was approaching and consolidated for a while before starting a crazy bull run with the top being just under 400$.

Now, I do not claim that we will see something like this as 150% up from here would bring LTC price extremely high, however, it is important and interesting to see what happened during the last halving and what could potentially (especially if the cup&handle pattern plays out), come into being in the Litecoin markets.

 

How high could Bitcoin go?

If we do indeed see price swing to the upside once more, I am very sceptic that the 10000$ psychological resistance is going to hold. Only by shooting through that level (along with alts showing massive gains), we might see the real FOMO hit the markets which is when we tend to see a further correction as when people are most optimistic you should be most careful.

Price-wise, I believe Bitcoin could easily reach 11500$, which would pose another 30% increase in its price. However, during this run we can expect alts to make even higher returns than Bitcoin.

Contrary to where Bitcoin price could fall to, it is far more complicated and difficult to speculate where this rally could end, if it has not done so yet.

I must emphasize that my targets of taking profit are not only price-related but will mostly rely on the weekly RSI indicator, which is now reaching levels last seen during the 2017 bull market. If we were to rally so high, I will be looking for a test of 83-90 on the weekly RSI (relative strength index) before deciding to sell as I do believe we might be in a bull market already and opposed to a bear market, our goal here will be to buy the dips and sell into extreme overbought conditions.

Weekly RSI indicator (below the chart) slowly reaching levels last seen during the last bull market.

Weekly RSI indicator (below the chart) slowly reaching levels last seen during the last bull market.

To conclude, we are a part of a very interesting market which even when rallying higher is shaking out over-leveraged traders and making us question everything it may do. We are once again at an important point where getting above the 8000$ level is crucial for my bullish picture to play out. Currently it is too quick to say the bulls will surely make another fight in pushing the price to new yearly highs, but as explained throughout this blog, there are several factors I take into consideration that make me believe this is possible, and perhaps even more likely.

Side note: We have created a survey on Twitter about whether Bitcoin will hit 6000$ or 10,000$ first. Vote HERE, we would love to hear your opinion!

 

Hope you liked my blog and if you did, please leave a comment below with your opinion on the topic as I would really like to hear from you guys as well.

I wish everyone a great weekend and successful trading!

 

M.F.

 

 

Disclaimer: This is not financial advice. Always do your own research before investing and/or trading. Cryptocurrency markets are extremely volatile and thus should be approached with caution. Make sure to limit your exposure according to your risk profile.

 

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