The bitcoin-US dollar (BTC/USD) exchange rate is gaining altitude after the bearish Doji reversal seen earlier this week failed to keep the cryptocurrency below its 50-day moving average.
At press time, bitcoin is trading at $4,325; up 1.46 percent as per data from CoinMarketCap. The two-day sell-off ran out of steam earlier today at the low of $4,150. The subsequent rebound then gathered pace above the 50-day moving average of $4,187.
However, the rebound from the 50-day moving average support seen in the one hour indicates the fears over the event are overblown. So, is bitcoin set to fly high or is the rally a bull trap?
The price action analysis suggests the cryptocurrency is currently hovering in the no man's land.
A solid rally from the 50-day moving average support, though encouraging, is not enough. BTC needs to take the rising trend line, in which case the odds of a rally to $4,700 levels would improve significantly.
was confirmed on Tuesday. Today's rally from the low of $4,150 to $4,325 adds credence to the argument that moving average crossovers tend to work after a time lag.
Bearish Scenario - Potential Head and Shoulders
But while there's reason for optimism, bitcoin is not out of the woods yet. Investors need to watch out for a failure at the resistance offered by the rising trend line as it could lead to a head and shoulders pattern.
Head and shoulders formation consists of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. A break below the neckline indicates a bearish trend reversal.
- An end of the day close above the rising trend line would open doors for a rally to $4,700
- Meanwhile, a failure to take the rising trend line followed by a break below the head and shoulders neckline support of $4,170 would open up downside towards $3,870.
Teddy bear image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.