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This Could be a Pivotal Moment for Bitcoin

Over the last twenty-five days, bitcoin has been on one hell of a run higher. On July 19th, bitcoin's price dropped below $30k (Coinbase price) for the second time and looked as though it was set to go much lower. But on July 20th, bitcoin's price stabilized, and after two dips down to near the $29,300 level bitcoin's price started to slowly rise again. Then on July 21st bitcoin's price exploded higher by over $3000 which started a run of ten consecutive green days in a row. It certainly has been a very impressive recovery over the last three-plus weeks.

Bitcoin Daily Chart

Now the question is. Could this be a sign that the bear market bitcoin has been in for months is ending? Or better yet could this be the start of a new bull market sending bitcoin's price to new all-time highs? Or, is this nothing more than a bear market bounce destined to fail, sending bitcoin's price to new lows? I really wish I knew the answer but I am afraid all we can do is watch for signs of weakness or strength that may give us a clue to which way bitcoin's price is heading.

On the positive side, the price is above the daily 200 SMA (simple moving average) which in past bear markets has shown to be stiff resistance. Also, the daily 50 EMA (exponential moving average) has just pushed back above the daily 200 EMA forming a golden cross. A golden cross is a bullish signal associated with important upward price movement, it is often seen as a strong indication that an asset's price will continue to rise.

Bitcoin 2018 Daily Chart

Even with those positive developments, we need to keep in mind that bitcoin has had very nice price recoveries or bounces during bear markets. Looking back at the 2018 bear market one such recovery (bounce) shows a strong resemblance to the current recovery. Looking at the chart above you can see that from the bottom to the peak it was a 54% recovery, that is one heck of a bounce. You can also see that just prior to the recovery there was a death cross and right near the peak, there was a golden cross. I am pretty confident that during the recovery many people were convinced that it was the start of a new bull market. In the end, though the golden cross failed and the recovery proved to be nothing more than a bull trap.

One important difference to me is that in the 2018 case the price was never able to push above the daily 200 SMA and instead was rejected and sent lower and currently, bitcoin's price sits above the daily 200 SMA. I'm not suggesting that just because this recovery resembles a failed recovery in the past that this one is doomed as well. What I am suggesting is that we need to be aware that bitcoin is not out of the woods yet and that this recovery, in the end, could ultimately prove to be a bull trap as well.

Moving forward there are a few things that I will be watching for, the first will be watching to see if bitcoin is able to stay above the daily 200 SMA. Secondly, I do not believe that bitcoin's price can keep up the pace at which it has been rising and surely there will need to be pullbacks. When these pullbacks occur I will be watching and hoping for higher lows that will keep the uptrend intact. So far in this recovery buyers have been very willing to buy up any dips, I will be watching to see if this continues.

So, wrapping things up I want to say that I remain very bullish on bitcoin long term, it is the short to medium term that I am not too sure of. My hope is that this recovery is more than just a bear market bounce and that it leads to many more new all-time highs for bitcoin.

That's all I've got for now.

Take care!


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