Bitcoin threatens to break above $11,000 once again after its recent drop to $9,500. Although BTC dominance appears overdue for a major correction, it still remains bullish from a technical perspective.
The market sentiment around Bitcoin was stoked following Bakkt’s approval for physically-settled Bitcoin futures. As the first signs of the continuation of the bull trend, Bitcoin appears to be consolidating and could be bound for another surge.
Bitcoin dominance surged in the last two months after breaking out of an ascending triangle that began forming at the trough of the correction in 2017 (where BTC’s dominance was at a historic low of 35 percent).
However, it seems BTC dominance recently hit an exhaustion point after reaching 71.50 percent. In fact, the TD sequential indicator is giving a bearish signal (in the form of a green nine), which could allow Bitcoin’s dominance to retrace within the next few weeks.
This technical index predicts a one-to-four week correction that will be confirmed once a red two candlestick trades below a preceding red one candlestick. On the other hand, the bearish signal will be invalidated if a green two candlestick trades above a preceding green one candle, which will allow the uptrend to continue and possibly take BTC dominance up to 80 percent.
It’s worth noting that since late 2017, the last four times the TD sequential indicator gave a sell signal (in the form of a green nine) three were correct.
The first happened the week of Nov. 6, 2017, which resulted in a 25 percent plunge from a market share of 65.6 to 48.5 percent. The second sell signal occurred the week of Mar. 26, 2018, taking dominance from 50.2 to 38.7 percent. The last retracement was the one in the week of Sept. 17, 2018, which dropped BTC’s market share from 58.8 to 51.3 percent.
Bitcoin price analysis
Even though Bitcoin dominance over the market appears to be in a bearish posture, its price looks bullish based on the 1-week chart. BTC recently managed to regain support at the 7-week moving average, which is a strong positive sign.
This moving average represents a significant support level for Bitcoin’s bullish trend. As a matter of fact, since this cryptocurrency moved above the 7-week moving average in mid-February, its price has been trending up, enjoying a 292 percent increase. Following the peak at $13,870, Bitcoin dropped below this moving average twice, but it immediately went back above it which adds credibility to the bullish outlook.
Therefore, as long as BTC remains trading above the 7-week moving average on the 1-week chart, its long-term perspective will remain bullish. However, breaking below this moving average could trigger a major correction down to the 30 or 50-week moving average.
Based on the 1-day chart, a bull flag seems to be forming. This is considered a continuation pattern that develops after strong upward movement, known as the flagpole—and is succeeded by a consolidation period, known as the pennant—that tends to breakout in the direction of the previous trend.
At the moment, Bitcoin seems to be in the consolidation phase of the bull flag pattern. Since BTC appears to have failed to break out of the pattern, it went down to reach the middle of the flag. Now, BTC could be rebounding off the middle of the flag to the top to try to break out of it again.
If there is a breakout, the bull flag predicts a nearly 46 percent target to the upside (determined by measuring the height of the flagpole). Thus if this bullish formation is validated, it could take Bitcoin to around $17,000.
Nonetheless, a symmetrical triangle also appears to be developing on the 1-day chart. 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 35.50 percent target on both directions. Thus, a spike in selling or buying pressure could be used as confirmation of the direction that the pattern will break out to.
Due to the opposing views that the symmetrical triangle presents, the Fibonacci retracement indicator can be used to determine the different price levels that could lead to breakdown or breakout.
Measured from the low of $3,130 on December 15 to the high of $13,870 on June 26, this technical index predicts that a move below the 38.2 percent Fibonacci retracement zone could lead to a further drop down to the 50 percent Fibonacci retracement level. If this Fibonacci retracement level is not able to hold, then Bitcoin could continue declining to test the 61.8 percent Fibonacci retracement, which is where the bearish target of the symmetrical triangle sits.
Conversely, a move above the 23.6 and 16.18 percent Fibonacci could be used as confirmation that both the bull flag and the symmetrical triangle could be validated and Bitcoin will be bound to a major upswing.
Bitcoin continues consolidating after nearly two months since it peaked at $13,870. Currently, the symmetrical triangle that appears to be forming on the 1-day chart gives credibility to the bearish and bullish views seen over the market. As the price of Bitcoin contracts into a narrower range, it could soon breakout in any direction. Thus, it will be wiser to use the break of the support or resistance levels given by the Fibonacci retracement indicator as a confirmation of the direction of the trend.