Bitcoin Price Looks North As Trading Volumes Hit 9-Month Highs

Omkar Godbole
Feb 20, 2019 at 11:10 UTC
Updated Feb 20, 2019 at 11:22 UTC
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  • Bitcoin witnessed an inverse head-and-shoulders breakout on Monday and rose to $4,000 yesterday, confirming a bullish reversal on the daily chart.
  • The trend change is backed by a jump in trading volumes to levels last seen in May 2018. The rally, therefore, looks to have legs and December highs above $4,200 could come into play, albeit after a minor bout of consolidation or pullback, as the indicators on the 4-hour chart and daily charts are reporting overbought conditions.
  • A break below Monday’s low of $3,614 would invalidate the bullish setup, although that looks unlikely, as longer duration charts are beginning to align in favor of the bulls.

Bitcoin (BTC) could revisit December highs above $4,200 in the near-term as the recent rally is backed by a surge in trading volumes.

The leading cryptocurrency by market value is currently trading at $3,930 on Bitstamp, having clocked a 5.5-week high of $4,000 yesterday.

The 20 percent appreciation witnessed over the last 12 days is accompanied by a 28.4 percent rise in daily trading volumes, according to CoinMarketCap.

Notably, total trading volumes across all exchanges jumped 40 percent to $9.91 billion on Monday, validating BTC’s bullish breakout above $3,800. Further, investor interest in the cryptocurrency has increased post-breakout, with volumes rising further to $9.93 billion yesterday – the highest level since May 3, 2018.

So, the recent rally appears to have substance and prices could rise towards $4,236 (Dec. 24 high) in the near-term.

Daily chart

Both the inverse head-and-shoulders breakout and the triangle breakout seen in the above chart indicate a bearish-to-bullish trend change.

The 5- and 10-day moving averages (MAs) are trending north, indicating a short-term bullish setup. The 50-day MA has bottomed out (shed bearish bias) and the 100-day MA hurdle has been scaled.

While the path of least resistance is to the higher side, a rise toward the Dec. 24 high of $4,236 may not happen immediately. The 14-day relative strength index (RSI) has moved into overbought territory above 70.00, while the long upper shadow attached to the previous day’s candle is sending a similar message.

4-hour chart

On the 4-hour chart, the RSI is reporting overbought conditions and has diverged in favor of the bears (does not mirror the higher price highs) However, the stacking order of the 50-candle MA, above the 100-candle MA, above the 200-candle MA is a classic bullish indicator.

So, pullbacks, if any, could be short-lived – especially as the longer duration charts are looking increasingly bullish.

3-day chart

BTC’s current 3-day candle looks set to close well above $3,711. That would add credence to the bullish outside reversal candle created in three-days to Feb. 8 and bring potential for a move towards $4,429 (38.2 percent Fibonacci retracement of the sell-off from November highs to December lows).

Supporting that scenario are a bullish crossover between the 5- and 10-day MAs, confirmed earlier this month, and an RSI of 51.00.

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.