Bitcoin Bounces Back Above $47K Despite Bearish Chart Pattern
A bearish engulfing candle is just one signal among many market indicators and some analysts say the bull market is intact.
Bitcoin regained some lost ground early on Monday, so far ignoring early indications of a bearish reversal on the weekly chart.
The cryptocurrency climbed a high of $47, 162 during the European morning, having dropped to $43,119 on Sunday – its lowest point since Feb. 8. Bitcoin is up 5% over 24 hours near $47,230 at press time.
The rise comes despite signs of bearish trend reversal on a longer-duration technical chart. The cryptocurrency fell 21% in the seven days to Feb. 28, despite multiple favorable market news events, forming a bearish engulfing pattern on the weekly chart.
The candlestick pattern indicates a reversal to bearish conditions, as sellers succeeded in pushing prices below the previous week's "opening" price (on Monday at 00:00 UTC) .
A similar bearish engulfing pattern marked an end of the previous bull market in December 2017. The cryptocurrency then entered a 12-month long bear market which bottomed following an 83% drop to lows near $3,100.
While it's too early to call an end of the bull market, the bearish engulfing pattern may bring some chart-driven selling.
Blockchain data also shows signs of cooling down in demand. The total number of bitcoin addresses with less than 0.01 BTC has also fallen slightly, according to data from Glassnode, indicating retail investment has begun to ease. The same can be said for wallet addresses containing 1 BTC all the way up to 1,000 BTC, where interest among institutional buyers appears to be capped.
That said, the engulfing candle pattern is just one signal amongst many market indicators and historical data shows the cryptocurrency saw multiple corrections of 30%–39% during the 2017 bull market.
"BTC has found temporary footing," Jehan Chu, managing partner at cryptocurrency investment firm Kenetic Capital, told CoinDesk via WhatsApp. "Institutions and long-term investors are forming a solid backdrop and speculators smell a buying opportunity."
Traders should expect continuing volatility, he added, as buyers "prove out a floor" above the $40,000 mark before a return to $50,000 as buying resumes.
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