Nick Chong · 3 hours ago · 3 min read
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
Bitcoin dipped below $10,000 after nearly reaching $11,000. Despite the bullish sentiment seen across the market following Bakkt’s approval for physically-settled Bitcoin futures, BTC is sitting at a pivotal point that could mark the direction of its trend in the near future. The following technical analysis will evaluate the price points that could signal the next major move for Bitcoin.
Bitcoin Technical Analysis
The recent $1,000 move is clearly visible on the 12-hour chart. After BTC failed to break below the 200-twelve-hour moving average on Aug. 15, it quickly bounced off to the 150-twelve-hour moving average. Then, BTC consolidated around this area for four days to finally rise to the 100-twelve-hour moving average on Aug. 19.
As the volume behind Bitcoin’s move faded, the cryptocurrency failed to break above the 100-twelve-hour moving average. The result was a 7 percent correction. BTC could drop another 1.20 percent or more to test the 200-twelve-hour moving average again.
The 200-twelve-hour moving average holding or breaking is critical. Currently, Bitcoin is continuing its trajectory within a descending parallel channel, which is part of a major bull flag that has been forming since mid-June. This is considered a continuation pattern that developed after the 84.50 percent upswing BTC experienced from June 10 until June 26, known as the flagpole—which was succeeded by the current consolidation period, known as the pennant.
If this bullish formation is confirmed, it is likely that Bitcoin will end up moving in the same direction of the previous trend—predicting a 45.80 percent surge from the breakout point (determined by measuring the height of the flagpole).
Because the 100-twelve-hour moving average rejected the price of BTC, it prevented it from a further upswing that could have taken it to the top of the channel. As a result, this cryptocurrency appears to be retracing to the middle line of the descending parallel channel, which is where the 200-twelve-hour moving average sits. Falling below this area will likely accelerate the selling pressure behind BTC, taking it to the bottom of the channel. Conversely, if the middle line of the channel is able to hold, Bitcoin could rebound to the top leading to a breakout.
By measuring the Fibonacci retracement indicator from the low of $3,130 on Dec. 15, 2018, to the high of $13,870 on June 26, the different price points that act as support and resistance can be determined as the bull flag continues to develop.
Based on this technical index, a break below the 38.2 percent Fibonacci retracement zone ($9,765) could lead to a drop down to the 50 percent Fibonacci retracement level ($8,500). However, if the 38.2 percent Fibonacci retracement zone is able to hold BTC could go up to the 23.6 percent Fibonacci retracement level ($11,300).
The bull flag will be validated if Bitcoin is able to move above the 16.18 percent Fibonacci retracement level ($12,130) which could end up in an upswing that takes it to $17,000.
Instead of bull flag, a symmetrical triangle could be developing under the same timeframe. This technical formation represents a period of consolidation before the price is forced to breakout in a negative or positive trend. A move below the lower trendline marks the start of a new bearish trend. Meanwhile, a move above the upper trendline indicates the start of a new bullish trend.
By measuring the distance between the initial high and low, the symmetrical triangle predicts a 34.50 percent target in both directions. Thus, a spike in selling or buying pressure could be used as confirmation of the pattern’s break out direction. Due to the opposing views that the symmetrical triangle presents, the Fibonacci retracement indicator can also be used to determine the different price levels that could lead to breakdown or breakout.
A move below the 38.2 percent Fibonacci retracement zone could lead to a breakdown of the pattern that takes Bitcoin to test the 65 percent Fibonacci retracement level, $6,890. In contrast, a move above the 23.6 percent Fibonacci retracement area could result in a breakout that takes BTC up to $14,650.
Despite the volatility, Bitcoin continues consolidating. Based on the 1-day chart, two patterns with different outlooks appear to be forming, which could determine where BTC is heading next. On one side, a bull flag is developing that could lead to a 45.80 percent upswing, if validated. On the other, a symmetrical triangle could be forming which predicts a 34.50 percent breakout in any direction. Due to the opposing views of the latter pattern, it will be wiser to wait for a breakout or breakdown of the 23.6 to 38.2 percent Fibonacci retracement area before entering a trade.
It is worth noting that since Bitcoin hit $10,000 for the first time this year it has traded around this area several times. Following different upswings, everytime BTC returns to $10,000 altcoins tend suffer the most.
$BTC first hit $10K two months ago on June 21st. Since then, it has traded around this level on multiple occasions.
Every time it has returned to ~$10K, major alts have bled out a little more in the process. pic.twitter.com/b0WATr6KNa
— Ceteris Paribus (@ceterispar1bus) August 21, 2019
Although the popular cryptocurrency analyst is right in the sense that altcoins’ price action is correlated to Bitcoin, the altcoin dominance weekly chart foresees an upcoming change. Based on historical data, the altcoin dominance could be about to rebound from a trendline that has acted as support since Aug. 2014.
If this trendline continues to behave the same way as it did in the past, altcoins could capture 46 percent of the cryptocurrency market share, then it could precipitate the next “altseason.”