Bitcoin Price Consolidation May Have Weakened Bear Case

Omkar Godbole
Jan 18, 2019 at 11:00 UTC
Updated Jan 18, 2019 at 19:25 UTC
markets

Bitcoin’s eight-day stretch of consolidation looks to have weakened the prospects of a drop back to December lows near $3,100.

The leading cryptocurrency by market value has been restricted to a narrow range of $3,500 to $3,700 since Jan. 11.

That range play is somewhat surprising, as BTC had set the stage for a quick slide toward December lows near $3,100 with a 9 percent drop on Jan. 10 – the biggest single-day decline since Nov. 24. Notably, prices fell to $3,500 that day, erasing the hard-fought gains of the preceding two weeks.

Despite the sharp bearish reversal, a convincing break below the psychological support of $3,500 has remained elusive for eight days.

That could be considered a sign of sellers unwilling to offer the cryptocurrency so low in the bear market. Put simply, the probability of a drop to December lows has diminished, courtesy of the range bound activity.

As a result, range breakout and a re-test of $4,000 could be in the offing. As of writing, the cryptocurrency is changing hands at $3,620 on Bitstamp.

Daily chart


As seen above, BTC fell sharply on Jan. 10, confirming a bearish doji reversal. The relative strength index (RSI) also fell back into bearish territory below 50.00.

Still, the psychological support at $3,500 has held ground.

Hourly chart

The descending triangle breakout on the hourly chart could be considered evidence of bear failure at $3,500 resulting in positive price action.

More importantly, the triangle breakout has opened the doors to $3,724 – the neckline of the inverse head-and-shoulders pattern.

A move above $3,724 would confirm a bearish-to-bullish trend change on the hourly chart and allow a stronger rally to $4,000 (target as per the measured move method).

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  • BTC’s range play likely represents bearish exhaustion.
  • An inverse head-and-shoulders breakout, if confirmed, would open the doors to the psychological hurdle of $4,000.
  • Acceptance below $3,500 would reinforce the primary bearish trend (downward sloping 10-week MA) and boost the probability of a drop to $3,122, although this scenario now looks less likely.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; Charts by Trading View

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This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.