Bitcoin's (BTC) 45 percent month-on-month rally has likely put the leading cryptocurrency on the path to a long-term bull market, technical studies indicate.
As of writing, BTC is changing hands at $8,300 on Bitfinex, having clocked a two-month high of $8,507 on Tuesday.
A month ago, it was all gloom and doom in the bitcoin market, as the cryptocurrency had created back-to-back long-term bearish chart patterns in the months of May and June. Consequently, BTC looked primed for a move lower to $5,000.
However, the inverse head-and-shoulders breakout seen earlier this month confirmed a short-term bearish-to-bullish trend change. Furthermore, the convincing break above $8,000 seen this week appears to have set the stage for a major bull run.
Daily chart: Falling channel breakout
To start with, the pennant breakdown witnessed on June 9 had signaled a revival of the sell-off from the record high of $20,000 reached in December 2017.
However, the ensuing sell-off ran out of steam at $5,755 (June 24 low) and the subsequent recovery established a falling channel (bearish pattern marked by circles), which has been breached to the higher side this week.
So, what we have is an upside break of the four-month-long falling channel, i.e. a long-term bearish-to-bullish trend change.
4-hour chart: Rising channel is intact
The short-term outlook also remains bullish as indicated by the rising channel (higher highs and higher lows). Still, there is merit in being cautious as the above chart also shows a bearish relative strength index (RSI) divergence, which could yield a price pullback.
- BTC has likely witnessed a long-term bullish reversal this week.
- In the short-term, BTC may struggle to find a firm foothold above the all-important 200-day moving average (MA) hurdle of $8,593, courtesy of overbought conditions.
- BTC could revisit the 100-day MA support of $7,616 if the bearish RSI divergence seen in the 4-hour chart pushes prices below $7,938 (rising channel support).
Disclosure: The author holds no cryptocurrency assets at the time of writing.
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.