Supported by strong volumes, bitcoin prices sprinted to a five-week high of $4,875 last night before the move ran out of steam.
The bitcoin-U.S. dollar (BTC/USD) exchange rate spent 12 hours working hard to retake $4,800. However, at press time, bitcoin's price had dropped to $4,770 – still up 12 percent in the last 24 hours. Week-on-week, the price is up 10 percent, while on a monthly basis, the cryptocurrency has seen 12 percent gains.
Indeed, despite the Chinese ban on ICOs as well as hints Russia may take new restrictive actions, bitcoin has been able to regain poise in a relatively short period of time. Less than a month ago, BTC had dropped to $2,980. As of now, bitcoin is only 4.8 percent short of its all-time high of $5,000 set in early September.
The stellar recovery could be attributed to an increased trading activity in Japan, South Korea and Hong Kong in the aftermath of Chinese crackdown. Speculation is also doing the rounds that fears of increasing ICO restrictions across the globe may have triggered a rotation of money out of ether and ethereum-based tokens and into bitcoin.
Currently, bitcoin looks set to revisit record highs.
Caution is advised, though, as the price action analysis indicates that the world's largest cryptocurrency may see a minor wobble before achieving new heights once again.
The 1-hour chart shows:
- A bearish symmetrical triangle breakdown
- A drop in the volumes over the last few hours
- Rising trend line support at $4,700.
A "symmetrical triangle" is a chart pattern characterized by converging top and bottom, and is formed when there is indecision in the marketplace. It may be both a reversal or a continuation chart pattern.
A downside break, as seen on the chart above, shows potential for a pullback.
The daily chart shows:
- Volumes rose above the 30-day average on Monday, adding credence to the rally.
- The 14-day RSI is rising and well short of the overbought territory (which would be above 70.00).
- Both 5-day moving average and 10-day moving average are sloping upwards, indicating pullbacks are likely to be short-lived.
A pullback to $4,550-$4,500 appears likely, as indicated by the bearish symmetrical triangle breakdown and overbought RSI on the 1-hour and 4-hour time frame.
Dips are likely to be short-lived, as suggested by the rising lows pattern, upward sloping 5-day moving average and 10-day moving average. The pullback from $4,875 is accompanied by a drop in volumes, which indicates the retreat is due to profit-taking.
Still, the broader outlook remains constructive.
Bitcoin looks likely to revisit the $5,000 in the days ahead, with July's pattern being closely repeated. Only an end of the day close below $4,400 would abort the bullish view.
New to bitcoin trading? Read our 'Blockchain 101' Guide on how traders use technical analysis a tool.
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