Crypto Frontline

Bitcoin Briefly Breaks above $16,000, Then Retraces

Bitcoin Briefly Breaks above $16,000, Then Retraces
November 12
13:21 2020

The Bitcoin rally continues to be relentless, even though other asset classes had been more volatile during the past two weeks. During the past three hours, the BTC price briefly broke above the $16,000 setting a new November and 2020 high. The positive market momentum is encouraging for buyers, even though we could argue that on higher time frames, conditions are overbought and it should be an alarm bell for those looking to buy at the current elevated levels.

Key resistance area ahead?

As we’ve mentioned in our last weekly crypto analysis, the key resistance area to watch is around $16,000-$16,500, and only if buyers manage to break and hold above it, should we expect the positive momentum to persist. However, given the impressive upward run, we suspect Bitcoin might be poised for a corrective move, as buyers will start to take some profits.

Bitcoin price
Source: tradingview.com

Based on the chart above, we can easily notice how selling interest emerged around $16,500, but so far, short-term support emerged around the 200 SMA. Bitcoin is almost flat after erasing 90% of the daily gains and while it remains below $16,000, we should expect to see more downward pressure.

Should we expect rotation into altcoins?

Because Bitcoin had been closely correlated with stocks the entire year, we should analyze what happened during the past few days on all the largest exchanges. More specifically, investors rotated away from tech stocks and jumped into battered stocks, after news about a COVID-19 vaccine from Pfizer boosted risk sentiment.

Considering BTC had been the leading market performer, even while altcoins were consolidating, should be expected to see other names starting to post more solid gains? That is already unfolding, although at a mild pace so far, given Ether alongside other large-cap tokens are starting to be more active.

Another important aspect to consider is the overbought condition of BTC. Since the middle of October, the daily RSI (14) keeps trading above 70 and that is the first time this year when it occurs.

We can’t rule out a continuation higher because the magnitude of the move is difficult to predict, but as Bitcoin continues to remain on high heels, the likelihood of a corrective move increases, and thus buyers should remain cautious with new trading positions. The rapid rise of Bitcoin and other cryptocurrencies is expected to trigger a stronger regulatory response from public institutions, the same as it happened in 2018 when a bear market followed the massive bubble.

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