Bitcoin has made another aggressive pump to the upside but this was not a surprising move. We discussed this just yesterday in our analysis in two different ways. First, we talked about the probability of a retest of the 1.272 fib retracement level. After that, we talked about how the price has yet to break a key trend line support on the 1H chart for BTC/USD. Until and unless that was broken, we had no reason to be bearish. As we saw soon afterwards, that trend line held and the price ended up shooting much higher. That being said, there is no reason to be overly bullish just yet because BTC/USD remains within the rising wedge it has been trading in.
The rising wedge that we see on the BTC/USD chart has a very high probability of breaking to the downside. The recent move seems to be a ploy to get more bulls excited and have them trapped before the next crash. We have seen on charts like ETH/USD that the price has now shot up past the 61.8% fib extension level around $143.75 on the daily time frame. This is not surprising at all considering it has happened before and a lot of traders have their stops around key levels like these. Once those stops were hit, the price pumped through it and shot up higher. However, the reason this is not bullish to me, at least not yet is because we have yet to see follow through.
Pumps like these happened in the past and in the case of Ethereum (ETH) we have even seen multiple daily candles close above both the 38.2% and the 200-day moving average before it turned out to be a fake move and the price crashed hard afterwards. We have seen resistance trend lines being invalidated in the past and this time might be no different. This is why it is very important to wait for follow through and confirmation of a trend. The EUR/USD forex pair continues to have a bearish outlook. We can spot a potential head and shoulders on the daily chart for the pair which is a red flag and warns us that further downside might be about to come in the cryptocurrency market.
Bitcoin dominance (BTC.D) has just tested the key 200-day moving average. We have been waiting for this retest since April, 2019. This now means that Bitcoin dominance (BTC.D) is in the clear to shoot up. We know from Bitcoin’s trading history that this happens for one of two reasons. Either the price of Bitcoin shoots up while the rest of the market lags behind or the entire market crashes with Bitcoin holding its ground better compared to other cryptocurrencies. At this point, it seems like the latter might be happening which is another sign to remain extremely cautious and not to be carried away by the short-term bullishness in the market.