Bitcoin held its 11-week support despite a rough weekend to offer bulls some hope of a resumed uptrend, although doubts remain about its ability to push on. Alts remain in a tricky spot, with Bitcoin dominance poised to resume its uptrend and Ethereum looking somewhat anemic against Bitcoin.
Bitcoin Bounces off Support
After dipping below the support line to $8,408 at the monthly open on Sunday, Bitcoin has since bounced back to the $8,700 region today, showing that it isn’t quite ready yet to give up the bull run. On a daily timeframe, we can see that the $8,500 region is key as this continues act as the support line that began back in mid-December:
If this support line broken then we could see a more severe reset to the mid-$7000s, which would wipe out almost the entire year’s gains and call into question Bitcoin’s strength going into the halving.
On a higher timeframe we can see that Bitcoin has today broken out of a four-day downtrend, potentially suggesting that we are at the early stages of a reversal:
However, we would caution against setting too much store by short analysis windows as they are often not strong enough to indicate much in the longer term. For intraday traders however such tools can be useful for indicating the potential direction of the asset on a shorter timeframe.
Confirmation of a true reversal, at least on the daily timeframe, will come if Bitcoin can end the day above $8,560. That will represent the third consecutive higher high and would be a nice show of strength from bulls. Ending the day under $8,500 would show that Bitcoin doesn’t have the momentum to push on yet and, again, further downside.
Alts Looking in a Tricky Spot
Ethereum’s chart against Bitcoin, which we tend to use as our alts bellwether, is looking more positive since it fell through its bullish support last week:
As we can see, ETH is still respecting the bullish support line it has set for itself since the end of January, although its rather flat performance in the last three weeks suggests that the chances of it moving up off this support line are slimmer than falling through it for the second time in two weeks.
Looking at the Bitcoin dominance chart shows that something is brewing on the alt front:
Bitcoin is still respecting a three-week support line, but the hourly chart shows a potential pennant formation, which is traditionally a bullish sign. However, with only two touch points at the top of the pennant we need to be wary of misinterpreting the data.
Even if this is indeed a bullish pennant formation, it doesn’t necessarily mean that the Bitcoin price will increase. All it means is that whatever happens next, alts are likely to lose market cap to Bitcoin – in a sell off this would mean that alts will likely suffer more, while money will likely flood into Bitcoin from alts if the Bitcoin price were to suddenly increase.
1st of the Month Volatility
The start of a new month is always a dicey one as far as crypto is concerned, with volatility almost guaranteed as futures speculators close their old positions and open new ones. The next couple of days should give us a much clearer idea of where Bitcoin is headed in the short to medium term, and how alts will fare as a result.