- Having retraced the $6,000 Elon Musk Bitcoin pump, Bitcoin is stuck in a downward channel
- Two critical rejections since the pump suggest that a retest of the bottom of the channel is inevitable
- Monthly candle close suggests reversal in February
Bitcoin looks set for a retest of its previous support after failing to capitalize on the Elon Musk-induced pump last week. Having rocketed by $6,000 last week, Bitcoin fell back just as quickly to find itself firmly entrenched in a descending wedge:
Bitcoin has also experienced two key rejections since its collapse, further reinforcing the idea that it is not ready to challenge all time highs:
To retain any bullish momentum, Bitcoin needed to close above the $34,000 level, and ideally the resistance level in the pink box, but it was unable to do so, although it did find support at $32,250. Bitcoin’s next move is crucial, as a daily close above the pink box would suggest that more upside is probable, whereas another rejection would see it testing the $32,000 support zone again, and potentially lower.
Whichever direction Bitcoin ends up moving on a broader scale, only a daily break of the descending wedge will give us an indication of a longer term move.
Monthly Bitcoin Candle Reinforces Bearish Thesis
The bearish thesis is borne out by the monthly candle which closed yesterday and is almost a replica of December 2017:
After a four-month uptrend a pullback is to be expected, especially with other factors combining to put pressure on Bitcoin’s ability to continue upward. It is for these reasons that we continue with our expectation that a pullback to the support at around $26.5k is anticipated in the coming weeks.
Such a pullback might be good for alts if the fall is slow and steady, but sharp corrections will result in drawbacks for alts, although January saw alts reacting well to Bitcoin pullbacks, suggesting that they are still in rude health.