Bitcoin has experienced a small price bounce totalling 4.38% over the past 24 hours. During the trading session, Bitcoin had managed to rally and reached a high of $6647 (circa 7% 24hr) before retracing to where it is currently trading at $6344. This price relief has brought the total week on week price action for Bitcoin to just over 0.37%, at the time of writing.
What’s been going on?
BTC holders have been panicking over the past couple of days as the cryptocurrency giant, briefly, broke below $6000. However, the recent price bounce has revived spirits amongst the community as speculators are expected a short squeeze incoming.
What is a short squeeze?
Put simply, a short squeeze is a trading scenario where those traders that have shorted the market (betted that it would go down) have their hands forced and are ‘squeezed’ out of their short positions during a sharp price increase such as today.
Those that have shorted the market need to close their positions as they are on the wrong side of the trade. To close their positions they need to ‘buy’ back Bitcoin causing a further momentum based price increase.
Where is Bitcoin currently ranked?
Bitcoin is still holding its crown as the number 1 cryptocurrency in terms of market cap size. It has a market cap value of $109 billion. The 64-month-old coin has seen a 5% price drop over the past 30 trading days and a 22% price drop over the past 90 trading days.
Let us continue to analyse price action for Bitcoin over the short term.
BTC/USD – SHORT TERM – DAILY CHART
A brief catch up
In our last price analysis, catch up here, we had stated that BTC had met resistance at $6,471 and if the bears would take control we were to expect support at $6,129 (.886 Fib Ret), followed by $6,000 (psychological round number) and if we would break below $6,000 we were to expect final support at $5,916 (1.618 Fib Extension).
So what actually happened?
We can see that the bears did take control and push BTC below our expected support levels and reversed just below our final highlighted support at $5,916. Since hitting this low, Bitcoin had experienced a price relief and has rallied all the way until meeting resistance highlighted by the long term .786 Fibonacci Retracement priced at $6,622. Bitcoin has since retraced slightly and is now trading at around $6,340.
Where can we go from here?
From the perspective of a daily time frame, if the bullish momentum can continue over the next few days and push price action above the long term .786 Fibonacci Retracement priced at $6,662 then we expect immediate resistance to be located at the previous short term .618 Fibonacci Retracement priced at $6,848. This Fibonacci Retracement is measured from the entire bullish run seen throughout July.
If price action can continue even higher, we expect further resistance to be located at the 100 day moving average which is currently hovering around the $7,300 handle. Further resistance beyond this will then be expected at the long term downward sloping trend line.
What if the bears regain control?
If the bears pick up momentum once again and push price action below the short term .886 Fibonacci Retracement priced at $6,129, then we expect immediate support to be located at the $6,000 psychological round number handle. Support expected below this level can be located at the 1.618 Fibonacci Extension level priced at $5,916 followed by the downward sloping trend line.
Support located even further below this level for Bitcoin is expected at June 2018’s price lows around $5,783.
What are the technical indicators reading?
The technical indicators are still currently favouring the bears as the RSI trades below the 50 handle. However, over the past few trading sessions, the RSI has managed to break up from extreme oversold conditions as it now is beginning to approach the 50 handle. This can be interpreted as a sign that the bears are losing momentum within the market. A sustained break above the 50 handle would still be required to confirm that the bulls are regaining control.
Let us quickly analyse price action over the last trading session and analyse the previous move higher a little closer.
BTC/USD – SHORT TERM – HOURLY CHART
What happened in today’s price action?
Analysing the market from an hourly perspective, we can see that the recent rise in Bitcoin started from a low of $5,858 and extended to a high of $6,647. This was a price increase totalling 13% from low to high.
Did we fall off?
Since then we can see that price action has fallen off slightly and retraced up until the .382 Fibonacci Retracement level priced at $6,345. This Fibonacci Retracement is measured from the bullish run outlined above.
What can happen now?
From a short term, hourly perspective, If this short term Fibonacci Level holds, we can maybe expect price action to make another run toward the long term resistance highlighted at $6,622. A break above this would put our bull scenario above into play.
Alternatively, if price action continues further below the short term .382 Fibonacci Retracement level, then we could expect further support to be located around the short term .618 Fibonacci Retracement priced at $6,158.
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