Bitcoin Breakdown: Has Everyone Gone to Gamestop?
Bitcoin, BTC/USD Talking Points:
- The Bitcoin bull has taken a back seat, at least for now, but speculative fervor continues to run high as witnessed by the saga taking place in the stock of Gamestop.
- Bitcoin has seen rejection at the 40k but continued support above 30k – do bulls have another run up to fresh highs left in the tank?
- The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
The speculative fervor in Bitcoin seems to have calmed for now. But, as has been widely reported, there’s not a lack of that in other areas of the market at the moment, such as what’s taking place in the stock of Gamestop.
In Bitcoin, the cryptocurrency came into the year with a full head of steam, easily pushing up to another fresh all-time-high until prices were eventually able to test above the 40k level. But, that’s when matters began to shift, and what started as a minor pullback turned into a deeper reversal, with BTCUSD pulling back to the 30k level last Thursday. Since then, it’s been a tug-of-war with a generally bullish bias. But bulls have yet to get back on the bid in the way that they were at the end of the year, begging the question as to whether the 40k inflection will form a top as continued profit taking begets a deeper pullback.
Bitcoin BTC/USD Daily Price Chart
In early-January, as prices in Bitcoin were jumping higher, price action built into a symmetrical triangle formation, often indicative of digestion after a prolonged trend. There was a much shorter-term version of a similar formation looked at a couple of weeks ago, just before Bitcoin went up for another resistance test at the 40k level before pulling back again.
The current symmetrical triangle saw a downside breach last Thursday as prices went down for that support test at 30k. Since then, there’s been quite a bit of gyration; but a Fibonacci retracement produced by connecting the Jan 19th high to the Jan 21st low has produced some workable context for the cryptocurrency.
On the hourly chart below, there’s already been a couple of tests at the 23.6% marker around 30,941, and this can function as an ‘s1’ level. Below that, there’s a confluent batch of possible support from the 30k psychological level up to the 14.4% retracement of 30,106.76. And below that, the 28.8 low from last week can function as an ‘s3’ level of support.
With current price action finding resistance at the 38.2% retracement, traders can cast their gaze for ‘r1’ resistance up to the confluent patch running from 32,996-33,337, after which yesterday’s high of 34,888 can span up to 35k to produce an ‘r2’ zone.
Bitcoin BTC/USD Hourly Price Chart
Chart prepared by James Stanley; Bitcoin on Tradingview
--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.