After days of no price action, Bitcoin (BTC) started to show signs of life on Sunday and Monday morning. The leading cryptocurrency broke higher on Sunday morning, pushing past the $100 range that had defined Bitcoin’s price for the better part of three days.
At its peak on Monday, the cryptocurrency traded as high as $7,700, buoyed by a sentiment that a full-fledged reversal was on the horizon.
After Sunday and Monday morning’s 7% surge, however, Bitcoin settled down, falling as low as $7,250 as bulls failed to maintain the momentum. Despite this short-term pullback, analysts assert that the ball remains squarely in the court of bulls.
Bitcoin Ready to Return Higher, Analysts Say
Analyst Crypto Buzz recently noted that despite the drop that just took place, BTC’s outlook is looking decisively bullish, with a divergence forming between the Relative Strength Index (RSI) and the price, implying that continuation to tap $8,000 is possible in the coming days. That’s not to mention that the cryptocurrency remains above two key levels: the horizontal resistance around $7,200 and the moving average depicted in red below.
Thank me later!!! pic.twitter.com/WEQwX3ZC7s
— CryptoBuzz👨💻🧘♂️👨💻 (@Crypto_Buzz_247) December 23, 2019
That’s not to mention that according to Scott “The Wolf of All Streets” Melker, BTC’s performance last week has created a very important signal on the weekly chart: a “massive bullish divergence in oversold territory on Stochastic Relative Strength Index.” For those unaware, the divergence Melker has pointed out is the fact that the Stochastic RSI is trending higher while the price is putting in lower lows.
(1) The weekly XBT chart confirmed the massive bullish divergence in oversold territory on Stochastic RSI. This is the fourth time that this has happened since the Bitcoin top. The first moved price from $6,400 to $9,900… pic.twitter.com/VpHArXdGzr
— The Wolf Of All Streets (@scottmelker) December 23, 2019
Per the trader, this is the fourth time this signal has been seen since the $20,000 top seen in late-2017. The first preceded a bear market rally from $6,400 to $9,900 in mid-2018, the second preceded the 330% jump in the Bitcoin price seen from December 2018 to June 2019, and the third predicted the move from $7,400 and $10,400 that took place just weeks ago.
Considering the historical bullish significance of this signal, there’s a high likelihood that BTC could begin to gain bullish momentum on a medium-term time frame in the coming weeks.
Don’t Forget the Headwinds
Again though, there remain headwinds on the horizon for Bitcoin.
One of those headwinds is the fact that the CME Bitcoin futures contract for December is expiring at the end of this week. A market commentator found that in the week ahead of all previous CME futures expiries, there was a 70% chance that Bitcoin trended lower, with the average loss coming out to 2% in seven days.
This implies that BTC could easily drop again as the December 27 expiry nears; then again, though, the 2% loss is just an average, meaning that the CME expiry could suggest Bitcoin may see a red week.
On the technical side, a popular trader going by “PostyXBT” remarked that while he believes Bitcoin’s recent price action is extremely bullish for BTC on a shorter-term scale, the long-term downtrend remains intact for one reason: BTC continues to trade under the key $7,800 level. He elaborated in a message posted to his Telegram channel:
“However, the macro set up remains the same. Until we see a weekly close above 7.8k or further momentum from bulls, my set up remains valid.It’s easy to be distracted with all the noise from CT as the bulls are out in force and I understand why.”
$7,800, as marked by his chart (seen below), has acted as both a key support and a key resistance level for BTC over the past few months, meaning that reclamation of the horizontal on a weekly basis is a must for bulls.