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Bitcoin Outlook: Bullish Scenario May Play Out if Key Technical Support Holds

Bitcoin Outlook: Bullish Scenario May Play Out if Key Technical Support Holds

Diego Colman, Strategist

BITCOIN WEEKLY FORECAST: SLIGHTLY BULLISH

  • Bitcoin’s medium term outlook remains negative, but a near-term bounce may be in the cards
  • Crypto buyers could return to the market if BTC/USD manages to hold steadily above key support in the $29,150/28,600 range
  • If a technical rebound takes place after the recent sell-off, the $36,000 area would become a possible upside level of interest

Most read: Bitcoin and Ethereum Charts Continue to Build Bearish Patterns

Bitcoin's (BTC/USD) outlook has deteriorated severely after falling more than 50% from its all-time high near $65,000 set on April 14. Although the medium-term technical landscape has been damaged as price now trades below its 200-day and 50-day SMAs, there are some signs that the worst is over and that a temporary bounce may be just around the corner.

One of the reasons for optimism is that the $29,150/28,600 support zone has been very effective in containing declines in recent weeks. In fact, the price has not been able to close below this region on a daily basis since last year. As we can see in the chart below, each time the area has been tested, bulls have subsequently managed to push prices higher. The last time this happened was this week, when BTC/USD briefly fell to $29,300 to quickly bounce back above $32,000 in a matter of days.

In the week ahead, if prices hold above the $29,150/28,600 floor steadily (the line in the sand) and starts trending higher, buyers could be emboldened to re-enter the market on the assumption that weakness is abating and that the massive sell-off, having run its course, has come to an end. If this scenario materializes, the crypto asset could be on the verge of a bullish move towards key resistance in the $35,950/36,675 range.

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A few events that have taken place in the last few days may reinforce the recovery narrative. For example, JP Morgan’s decision to allow its financial advisors to give all its wealth management clients access to cryptocurrency funds may be seen a as tailwind for Bitcoin. At the same time, Elon Musk's admission that his space exploration company SpaceX owns Bitcoin and other supportive comments about the prospects for cryptocurrencies can also be seen as a somewhat positive variable, as they may offer some comfort to retail traders who thought the Tesla CEO had bailed on this market.

When analyzing bullish outcomes, it is also important to consider bearish cases. That said, if Bitcoin pivots lowers and falls below the $29,150/28,600 technical barrier decisively, all recovery bets are off, as this development could pave the way for a major move to the downside capable of taking the token towards trendline support around the psychological $20,000 mark.

BITCOIN TECHNICAL CHART

Bitcoin chart

Source: TradingView

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---Written by Diego Colman, DailyFX Market Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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