A week ago, the market was on shaky ground as volatility went through the roof with massive drops in portfolios seen across the board. However, this past week was relatively boring and stable as the price of Bitcoin (BTC) is now in a narrow range.
This narrow range is confusing the majority of traders as it is not hinting at any direction for further momentum. Will Bitcoin break back above $11,000 or will the markets close the CME gap at $9,650? Let’s take a closer look at the charts.
What are the crucial levels for Bitcoin?
The U.S. Dollar is the currency to focus on right now. As weakness returns to the U.S. dollar, it’s likely to expect that other asset classes like gold, silver and Bitcoin continue their uptrend.
BTC/USD 1-week chart. Source: TradingView
An often-made mistake by traders and investors in the markets: forgetting to zoom out. It’s very important to check higher time frames to see this bigger picture, and gauge where the market is currently at.
For cryptocurrencies and Bitcoin, it’s looking bullish and healthy. But traders should keep an eye on some important levels.
On the upper side, the $11,800 area is a crucial area that couldn’t be broken in the previous month, as the chart shows.
Therefore, the price of Bitcoin retraced south, making the marked green zone as the most important support zone right now.
If the price of Bitcoin sustains support above the green area between $8,850-9,300, the bullish structure remains valid. If the price of Bitcoin drops below the green zone, a further correction towards $7,400 becomes increasingly likely.
However, as the market remembers from 2016, a build-up toward a new bull cycle euphoria occurs via long sideways ranges.
BTC/USD 1-week chart. Source: TradingView
Indeed, the movements seen in 2016 are very similar to the current price action. One big surge upward (including a breakout), after which the price of Bitcoin corrects and starts to move inside a narrowing range.
This range is established by the high of the move and the previous resistance zone. If we compare that to the current price action, the upper range resistance is $11,800, and the lower range support is $9,200.
If the price of Bitcoin consolidates and breaks through $11,800, a potential target of $16,000 is on the table.
Total market capitalization crypto sees healthy correction
Total market capitalization cryptocurrency 1-day chart. Source: TradingView
The total market capitalization of cryptocurrencies is showing a healthy correction in an upward trending market.
For the first time since June 2019, the total market capitalization created a new higher high (based on candle closes), which is a bullish signal. However, many investors expect all upward moves to be similar to the 2017 mania.
That’s simply not the case as the current market structure is resembling only the start and build-up of a potential bull run similar to the sentiment and momentum of late 2016.
This means a slow upward grind, in which previous resistance levels are tested and confirmed as new support areas before moving higher.
In that case, the total market capitalization of crypto is still acting above the 100-week and 200-week Moving Averages (MAs) with crucial support beneath the current market cap.
If the total market capitalization holds the $270-275 billion areas for support, further continuation upward is likely. If a new impulse move occurs, the next resistance and target zone can be seen at $550 billion.
Levels to watch on the daily timeframe for Bitcoin
XBT/USD 1-day chart. Source: TradingView
The daily chart of Bitcoin is showing precise levels to watch. On the upside, if the price of Bitcoin breaks through the $10,450 level, the potential and crucial pivot is structured between $10,900-11,000.
If the market wants to move higher, the price of Bitcoin needs to break through the $11,000 level. But if the price of Bitcoin rejects at $11,000, it’s very likely to continue making range-bound movements and the possible closure of the CME gap at around $9,600.
On the downside, if the price of Bitcoin breaks below $10,000, further correction is likely towards the crucial pivot around $9,500. This dropdown warrants a close of the CME gap and a test of the essential weekly level.
Nevertheless, such a correction would still be classified as a healthy retrace in an uptrending market.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Published at Sat, 12 Sep 2020 14:03:00 +0000