To the surprise of many, Bitcoin (BTC) made a big move yesterday all the way to $7,500 in a matter of hours. While many investors were unaware of the real reason this pump occurred, many believed it had something to do with a Bitcoin ETF. Rumors of a Bitcoin ETF have been increasingly circulating in the crypto community for the past few days which is why investors were not willing to let go even as the price entered overbought conditions with the RSI reaching unprecedented levels on the 4H chart for BTC/USD.
This move was seen by many as a sign of reversal and investors rushed in to buy amidst fear of missing out on a Bitcoin ETF announcement. Even though it is true that Bitcoin (BTC) has had an extended correction for a long time now and that a reversal might be around the corner, it is still premature to assume that Bitcoin (BTC) is out of the woods. Technically, Bitcoin (BTC) continues to be in a downtrend as the price now faces resistance at $7,500. Since the beginning of this correction, many analysts have drawn what they have considered to be resistance lines for Bitcoin (BTC)’s downtrend. Most of those lines have been rendered false as Bitcoin (BTC) broke past them and still continued trading downwards.
Recent developments indicate that the ultimate line of resistance could be the one drawn on the chart above. It would mean that Bitcoin (BTC) has touched this resistance line only once, during the $7,500 retest. The reason this resistance line seems to be more plausible is because it properly takes into account every cycle of upward and downward movement. According to this chart, Bitcoin (BTC) moves upwards to hit the resistance line around $20,000 in January. Then it continues to move downwards to hit the support line at $5,800. Notice that Bitcoin (BTC) actually tries to make another top before falling down to $5,800 but it is unreasonable to assume it would touch the resistance line because it has not completed a downward move yet. The pattern of upward movement followed by downward movement continues all the way down. After hitting the support line at $5,800 Bitcoin (BTC) starts rising to touch the resistance line at $7,500. If Bitcoin (BTC) fails to break the downtrend trend at this stage, it means that the price will have to see another low possibly around $5,400.
Bitcoin (BTC) is still trading under overbought conditions as can be seen on the 4H chart above for BTC/USD. RSI is still trading above its EMA but it is likely to fall below it in the near future. This would mark a retracement to around $6,800. Stochastic conditions also signal a fall to lower levels after this unsustainable rally. While many believe that the recent price boost had something to do with a Bitcoin ETF or actual buying interest, it is important to note that the sole reason for this pump was liquidation of BTCUSDShorts on exchanges. The short squeeze misled mainstream investors into thinking something was up, so they rushed in to buy due to fear of missing out. In any case, this rally is unsustainable and a pullback to lower levels is expected. However, it is important to note that investor confidence in the market is starting to restore and we are most likely one big development away from the next bull run.