Updated: Sep 1, 2018
On the 8th of this month, I published a chart for Bitcoin showing how in my opinion Bitcoin had pushed way too far above the moving averages and also the long-term trend line. I explained what I thought the price of Bitcoin would do in the short term, I expected either a sharp pullback or a sideways consolidation period which would give the moving averages time to catch up and also bring the price back closer to the long-term trend line.
Well, this week we experienced a correction in the price of Bitcoin culminated by a big down day yesterday. As a result, the price of Bitcoin has returned to the long-term trend line, for now.
Moving forward your guess is as good as mine as far as where we go from here. I am impressed with the strength of the recovery so far but from what I see there is significant resistance in the $16,500 to $17,000 area so I will be even more convinced that this recovery is real if we can push through that area.
For the time being, we are in a short-term uptrend but IMO we are still at risk of rolling over and heading lower again. As you can see by the chart below, the price of BTC has, for the most part, followed on top of the 10 Day EMA (yellow line), with only occasional dips below the 10 and 20 EMA during corrections. Typically the price has recovered and moved back above the 10 Day EMA within a fairly short period of time. So what I would really like to see now is as I said above for the price to break through the resistance I see in the $16,500 to $17,000 area and to regain its position above the 10 Day EMA. If Bitcoin can achieve this (scenario #1), then I will have confidence this pullback was nothing but a short-term price correction just as we have seen many times in the past.
If instead Bitcoin struggles here and lingers below resistance in my opinion at best we could be looking at a longer-term consolidation period (which is still healthy). Or worse case (scenario #2), we could see the price roll over and head lower again possibly even down to the long-term trend line #2 (around $8000). My gut feeling is that scenario #1 is more likely to play out but that is just my personal opinion and even if scenario #2 is where we head, long term I am still very bullish on Bitcoin. I have only been talking about Bitcoin here but I would expect all of the rest of the cryptocurrency markets to follow Bitcoins lead.
It has been a very interesting couple of days, especially yesterday. In about 18 hours the price of Bitcoin moved over $10,000, where else would you see those types of moves? God, I love the crypto markets!
Well, that's all I've got on Bitcoin and the markets for now.
Until the next blog post, take care!