Bitcoin Breaks Above $8,000, But Can’t Break the 50 SMA
Skerdian Meta • 2 min read
Cryptocurrencies have received some strong bids recently, although not as strong as Bitcoin. Bitcoin has made quite a turnaround. In the last month or so, Bitcoin has gained around $2,500 which is nearly 50% of the value when Bitcoin was trading at the bottom, below the $5,000 level.
At first, I wasn’t very confident in this turnaround in Bitcoin because the weekly candlesticks were pretty small in the first few weeks of this reverse. But in the last two weeks, Bitcoin gained more confidence and the reverse higher gained pace.
The Fundamentals Behind the Turnaround
One of the main reasons for this turnaround is the fact that the big hedge fund BlackRock decided to start investing some of their funds in Bitcoin and other cryptocurrencies. Another reason for the decline during winter and spring was that traders sold Bitcoin ahead of the tax season, which is now over. Hence the turnaround in recent weeks.
The money management firm VanEck had a third attempt to open an exchange fund for Bitcoin ETF. It is awaiting the decision from the US regulators and if that goes through, then we will likely see another wave of buying. Banks and other financial institutional are also more confident now. Bitcoin and other cryptos survived the big surge in December last year, and the crash that followed which lasted for several months. This is a sign that digital currencies will be here in the long term.
Technically, this reverse was overdue since Bitcoin was oversold on all major timeframes up to the weekly chart. Last month, even the monthly chart became oversold, so it was time for a reverse or at least, a decent retrace up.
I know I said that Bitcoin is reversing, but we can’t call it a proper reverse until the previous highs are broken. The last low in June is still lower than the previous one in April and we are still below the previous high. The previous high comes at $10,000 exactly so the trend will turn bullish when Bitcoin moves above that major level.
The trend is still bearish until Bitcoin moves above the top of the range
But first, Bitcoin must overcome the 50 SMA (yellow). This moving average stands at $8,325 according to my broker’s platform. The high today was at $8,324 so the 50 SMA stands strong. This moving average has provided solid support twice and it might turn into solid resistance now. The price is already respecting the 50 SMA, so instead of continuing to climb up and reversing the big trend, Bitcoin might as well turn lower here and resume the bearish trend if the 50 SMA doesn’t let go.
These are two options from here on – up and enter a bullish trend or down and continuing the bearish trend. If the 50 SMA goes, then the road will be open until $10,000, then we will reconsider the reverse again when Bitcoin reaches $10,000. Alternatively, the 50 SMA holds and Bitcoin resumes the downtrend as buyers give up on their long positions.