This breakout above $35,000 earlier this week was significant as it opened the door to a new all-time high test. The final hurdle at $40,000 has prevented BTC from a new all-time high, while many all-time highs were established by altcoins during the past week.
Indeed, the crypto market is going parabolic as most investors have been seeing substantial increases in their portfolio sizes. However, the rally in DeFi alts, in particular, is at risk of becoming overheated as momentum may be swinging back to Bitcoin with BTC back above $40,000.
Moreover, will the CME futures listing of Ether (ETH) change the market momentum next week, or will Bitcoin continue its climb? Let’s take a look at the charts.
Bitcoin should break final resistance before new all-time highs
The 4-hour chart of Bitcoin shows a beautiful breakout above $35,000, which resulted in a healthy continuation toward $40,000. During this run, the $38,000 level gave a small rejection but wasn’t classified as a massive resistance zone.
The $38,000 level received its test during the Elon Musk pump, as Bitcoin’s price retraced significantly on the same day. Therefore, if Bitcoin would break through $35,000 again, it wasn’t surprising to see a continuation to $40,000 rather than another rejection at $38,000.
This $40,000 area is the final hurdle to break before new all-time highs. However, this new strength in Bitcoin means its market dominance is rebounding at the expense of most altcoins.
Is Bitcoin dominance ready to break out?
The Bitcoin dominance chart is a beautiful chart demonstrating how market cycles work. In recent years, the Bitcoin dominance has topped out in December, following by an altcoin surge led by Ethereum. This has been accompanied by BTC dominance dropping substantially in January.
This trend was repeated again this year with altcoins going parabolic, hitting new all-time highs as Bitcoin consolidated within a range.
However, every run comes to an end, and altcoins will correct. Historically, a temporary bottom has been seen in February, after which the Bitcoin dominance rises for a little. This rise of dominance would be in line with a potential correction in ETH price.
Ether CME futures will launch on Monday, Feb. 8, after which a correction should not come as a surprise. This is exactly what happened with Bitcoin CME futures in December 2017. This listing marked the top of the bull cycle and the beginning of a multi-year bear market.
Therefore, a correction for Ether may come as well with the focus shifting back to Bitcoin, particularly as Ethereum gas fees have been hitting absurd levels. This shift would cause Bitcoin dominance to increase substantially.
What are the next points of interest for Bitcoin?
The daily chart of Bitcoin can be used to define the next targets for Bitcoin’s price. If Bitcoin’s price can break through the $40,500 area, the following points of interest can be defined through the Fibonacci extension tool.
By using that indicator, the most common Fibonacci level is the 1.618 Fibonacci level. This level puts the potential price target for Bitcoin at $50,000, once it breaks the recent high.
However, Bitcoin’s price has been seeing a significant rally in recent months already. So a clear breakout above the previous all-time high should be combined with a clear support/resistance flip of that level. Otherwise, a continuation of the range-bound construction is likely to happen, as history shows.
In the cart above, Bitcoin’s price tried to break above the recent highs (after the halving) but couldn’t succeed, resulting in more ranging. An apparent breakout above the all-time high above $42,000 however, should propel Bitcoin’s price to $50,000.
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, 06 Feb 2021 12:00:00 +0000