Bitcoin Holds Bullish Market Structure

Data & Research / 19.12.2019

BTC/USD Daily 1

Despite BTC/USD’s drop below $6.5K earlier this week, price continues to oscillate within a bullish market structure, defined by the descending channel. Having found support on the lower bounds of the channel at $6.4K, a relief bounce of 15% to $7.4K followed after.

At the moment, BTC/USD sits above a key pivot zone which served as a support level in the bear market. This range lies between $6.1 and $6.8K and should act as a strong demand area, especially considering that $6K is a powerful psychological level. If broken however, the next support levels are between the $5.5K – $5K areas.

Conversely, price also faces heavy resistance. BTC/USD appears to be consolidating in a short-term range between $6.8K and $7.8K, faced by three key resistance levels. Firstly, the range top is a previous support turned resistance level, in addition to the further sell pressure presented by the 50 day moving average (DMA). Secondly, even if price breaks above this level, the 100 DMA and the descending channel’s upper bound serve as the next resistance. Following suit is the 200 DMA just beyond the channel’s top, which has historically shown to resistance in the past.

Importantly, BTC/USD’s relative illiquidity makes it prone to large swings and fake-out and this must be taken into consideration because it is important to manage risk prudently. It is possible that the large liquidity pool likely sitting below the demand zone will invite price to wick below it, triggering short-sell and stop-loss orders, only to reverse back up. This may occur because whales want to engineer liquidity to buy more coins at a cheaper price; this way they profit more.

Whichever direction price ends up going, large volume will give a strong indication if it’s a fake-out or not (the more volume there is the less likely it is a fake-out).

Featured image courtesy of Shutterstock.

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Patrick is a third culture kid born to Brazilian parents, who enjoys reading, writing and thinking. He believes we need to be relentlessly improving models for investing in good ideas and moving them from the lab to the market, which naturally draws him to the cryptocurrency and blockchain space.