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- Bitcoin’s price has recovered 40 percent of the bear market drop. The breakout has bolstered the bullish setup on the weekly chart, which is currently reporting the strongest buying pressure in six months. As a result, BTC looks set to break above the psychological resistance of $10,000.
- The price has already rallied nearly 130 percent so far this quarter. Hence, a temporary correction due to bull exhaustion cannot be ruled out.
- The outlook, however, will remain bullish as long the price is held above recent lows near $7,500.
Bitcoin’s (BTC) price has erased 40 percent of the sell-off seen in the twelve months to December 2018 and looks set to rise above $10,000.
The leading cryptocurrency by market value rose above $9,740 on Bitstamp earlier today, retracing more than 40 percent of the drop from the record high of $19,666 reached in December 2017 to the low of $3,122 hit in December 2018. The global average price, as calculated by CoinMarketCap, is just $150 away from achieving that milestone.
As of writing, BTC is changing hands at $9,840 on Bitstamp – the highest level since May 2018 – representing 31 percent gains from lows near $7,500 seen on June 10.
It is worth noting that bitcoin’s latest leg higher is a accompanied by a rally in gold prices. The yellow metal has risen from 1,320 to $1,411 over the last ten days.
The positive correlation between the two assets contradicts the divergent price action seen in the preceding seven months.
For instance, BTC fell from $6,200 to levels near $3,100 in four weeks to December 14, 2018. During the same time period, gold went from $1,200 to $1,300 and further extended the rally to $1,346 (Feb. 20 high). By early May, the yellow metal was down 6 percent from February highs, while bitcoin was up 76 percent from December lows.
The change from negative correlation to positive correlation, if sustained, could boost bitcoin’s appeal as digital gold. Many including the likes of Tyler Winklevoss, founder of Winklevoss Capital Management, already consider bitcoin as gold 2.0.
It remains to be seen if the two assets continue to move in the same direction in the near future. That said, technical charts indicate bitcoin is likely to extend its ongoing bullish run to levels above $10,000.
Weekly chart
Bitcoin’s convincing move above the widely tracked 38.2 percent Fibonacci retracement hurdle of $9,442 has strengthened the bullish case put forward by the higher lows, higher highs pattern, ascending 5- and 10- week moving averages and Chaikin money flow index, which is currently reporting strongest buying pressure in six months with a reading of 0.35.
As a result, the cryptocurrency looks set to test the next major resistance range marked by the April 2018 high of $9,949 and the psychological resistance of $10,000.
A high-volume weekly close above $10,000 would expose the 50 percent Fibonacci retracement resistance of $11,394.
It is worth noting that the cryptocurrency is up nearly 140 percent on a quarter-to-date basis (from April 1’s opening price). The bulls usually take a breather following such stellar rallies.
So, a sudden correction cannot be ruled out. That said, the outlook would turn bearish only if the price violates the bullish higher lows pattern with a move below $7,500.
Disclosure: The author holds no cryptocurrency at the time of writing