Bitcoin’s Latest Rally Attempt Faces Strong Resistance
Bitcoin’s price ran into resistance on Tuesday, as price action continued to cool following an explosive rally last week. The leading digital currency has backed off 3% from the most recent swing high in what appears to be a broad consolidation phase for cryptoassets.
The bitcoin price showed considerable variance on virtual exchanges through the early part of the day. It traded as low as $3,572 on Bitstamp and as high as $3,685 on Bitfinex. Aggregate pricing data courtesy of CoinMarketCap show an average value of $3,636.92, down 0.7% for the day.
Bitcoin has witnessed a sharp drop in momentum, based on the hourly RSI and MACD. Both indicators are flashing sell signals at the time of writing.
Trading volumes remain elevated, which reflects the dramatic rise in BTC circulation since the fourth quarter. Nearly $6.2 billion worth of bitcoin was traded on virtual exchanges over the past 24 hours, according to the latest available data. The largest markets by total volume were BitMEX (9.8%), CoinBene (4.2%) and OEX (2.6%).
Bitcoin’s market capitalization improved to $65 billion on Friday following an explosive move to the north. It has since cooled to around $63.8 billion. That represents 52.8% of the entire crypto market capitalization.
Key Levels to Watch
Bitcoin’s latest breakout was significant for several reasons. For starters, it pushed prices back above $3,550, a crucial long-term support that had threatened to expose greater downside. Below that level, there was little stopping price action from forming a new low. Additionally, the breakout came on the heels of a sharp drop in volatility that began in the latter half of December. For the bulls, these were encouraging signs that the market had finally turned a corner.
For bitcoin to confirm its bullish breakout, the price must return above $4,200, which is equivalent to the 15-week moving average. Below this level, any rally attempt is likely to fizzle out and be subject to profit-taking by the bears. This level represented the upper band of the new year rally that eventually gave way to further selling pressure.
But even if bitcoin climbed back above $4,200, it wouldn’t negate the long-term downtrend. To overcome that, the bulls need to retake $5,550. At the moment, there’s little evidence to suggest that such a momentous shift is imminent or even likely. Traders can therefore expect choppy conditions to persist indefinitely.
Additional reading: Has Bitcoin Bottomed? A Closer Look at the Bullish and Bearish Cases.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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