Bitcoin is rallying today, having bottomed out below the $6,000 mark yesterday.
As of writing, global average prices on CoinDesk's Bitcoin Price Index (BPI) are around $8,120. On Coinbase's GDAX exchange, bitcoin (BTC) moved above $7,944 - the confluence of 200-day moving average (MA) and 5-day MA - earlier today and was last seen changing hands at $8,200
The cryptocurrency has appreciated by 26 percent in the last 24 hours, according to CoinMarketCap. Also, prices are up 38 percent from the previous day's low of $5,947.40, as per the BPI.
Across social media, the sharp rise in BTC is being attributed to the cautiously optimistic tone set by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission at a Senate hearing yesterday. Investors seem to have taken heart from the fact that members of Congress and the SEC see potential in blockchain technology. Also, industry observers were impressed by the measured and sophisticated nature of the dialogue.
So, it appears bitcoin has moved out of the hot water, and the technical studies seem to confirm that a bottom has been made.
4-hour chart: Bullish price RSI divergence
- The bullish price RSI divergence (marked by dashed lines) indicates a short-term bearish-to-bullish trend change.
- Accordingly, BTC has moved above $8,000, but is yet to clear the descending trendlines hurdle marked as (1) and (2).
Daily chart: High-volume recovery
- A high volume recovery from $5,873 (previous day's low) and a positive follow-through today (break above the 200-day MA of $7,995) indicate the cryptocurrency may have bottomed out.
- Further, the daily RSI is rising from the oversold territory and has breached the falling trendline, suggesting scope for further gains.
Weekly chart: Bearish MA crossover
- The long-tailed candle indicates strong dip demand.
- BTC is attempting a break above the trendline sloping upwards from the April 2017 low and July 2017 low.
- The 5-MA and 10-MA bearish crossover (short-term MA cuts long-term MA from above) that occurred last month indicates that the long-run outlook still remains bearish.
- BTC looks set to cut through the descending trendline hurdle (1) and rise towards the downward sloping 10-day MA currently seen at $8,925 in the next 24 hours.
- A daily close (as per UTC) above the 10-day MA would open doors for a test of $10,000 - $10,623 (weekly 5-day MA). Further gains appear unlikely just yet, given the bearish crossover on the weekly chart.
- Bear scenario: Failure to hold above the 10-day MA, followed by a close below the 200-day MA would revive the bearish outlook. In such a scenario, prices may drop to $5,000 levels.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.
Chart image via Shutterstock