Bitcoin (BTC) Bulls Bid Support, Refuse to Surrender
- Bitcoin price action is working on a descending triangle
- BTC/USD tests key level of support
- Bearish sentiment holds, for now
Bitcoin (BTC/USD) Sits Comfortable at Critical Support
Bitcoin prices continue to consolidate as momentum appears to have stalled at an important level of support. Despite falling approximately 25% since reaching the historical high of $41,000 earlier this month, the first major cryptocurrency has still soared a staggering 228% since January 2020.
Although US Dollar weakness helped buoy gains for Gold, Silver and other safe-haven assets, Bitcoin and its Ethereum (ETH) counterpart appear to have taken on a similar role. However, the ‘Bitcoin Bubble’ is still under speculation and fears of a reoccurrence of 2017 events may be difficult for some to forget.
Bitcoin (BTC/USD) Technical Analysis
From a technical standpoint, BTC/USD is now resting at a critical level of support, formed by the 50% Fibonacci retracement level of the short-term move (Nov 2020 – Jan 2021) at $29,056. This level has played out on numerous occasions, with the formation of a descending triangle now coming into play, while testing the lower bound of the Bollinger Band.
However, the Commodity Channel Index (CCI) is currently lying below -100, suggesting that the digital currency may be oversold. If prices manage to fall below the 50 Day Moving Average and break through current support, bears may able to push prices lower towards the Dec 2020 levels around $22,000 in the near-term. On the contrary, if bulls can take charge, then it may be open the door for bullish continuation towards the psychological level of $40,000.
Bitcoin (BTC/USD) Daily Chart
Chart prepared by Tammy Da Costa, IG
Bitcoin (BTC/USD) Sentiment
At the time of writing, retail trader data shows 83.21% of traders are net-long with the ratio of traders long to short at 4.96 to 1. The number of traders net-long is 2.26% lower than yesterday and 8.59% lower from last week, while the number of traders net-short is 0.19% lower than yesterday and 6.43% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall.
Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.
--- Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.