After a very nice surge higher yesterday from just over $38k up to just over $42k bitcoin today has been mostly trending sideways. That really doesn't surprise me though, after such a large increase, bitcoin had become quite extended above the moving averages and needed to rest for a while.
Bitcoin 12-hour Chart
Looking at the 12-hour chart you can see that after a small pullback that started on Wednesday and lasted into Thursday, bitcoin made a huge surge of more than $3500 to peak at just over $42K. You can also see the pause and small pullback that BTC is going through right now. I would like to believe that this is more than just a bear market bounce but I believe the odds of that are fairly low. Having said that though this is bitcoin we are dealing with so anything is possible.
Bitcoin Daily Chart
Looking at the daily chart you can clearly see just how impressive of a recovery this has been. After ten green candles in a row, I feel that bitcoin is a bit extended and will most likely pull back at some point. As I have said what I would like to see is a small pullback creating a higher low and then for bitcoin to resume its push higher.
Earlier this week I re-entered some positions but I am treating this like a bear market bounce so I am keeping a very close eye on my positions and also running very tight stops which I will trail as they push higher. It's really hard to say just how much higher BTC will go, possibly around $45k or even $50k. There were a few very nice bounces during the 2018 bear market with the largest at about 100%. I really doubt we will see that large of a bounce, if we did it would put BTC back up near $60k. I do however think a bounce of 50%, 60%, or even 70% is possible before BTC reverses and heads lower again, a 70% bounce would put BTC up near $50k.
I realize that lately I always sound negative but I am just trying to be realistic. Like I said earlier, anything is possible but I would have to see much more out of bitcoin before I would change my opinion about this being nothing more than a bear market bounce. If bitcoin can hold above $40k for an extended period of time (weeks) or even push higher a hold those gains then I would have to start reconsidering my stance. For the time being though I will remain cautious and be very quick to exit the market on any signs of weakness. Risk management and protection of capital is the wisest thing we can do in these times of uncertainty. I would much rather miss out on some gains than being trapped in losing positions watching bitcoin sink lower.
No matter how this all turns out I will try to maximize any gains I can get while BTC is pushing higher. If this does turn out to be just a bear market bounce so be it, I will simply be patient and wait for BTC to bottom and then begin the process of building new positions for the next bull market.