Can Bitcoin Sustain Rally?
FOREX.com | Apr 13, 2018 14:18
All of sudden on Thursday at around 11:00 BST digital currencies came back to life after spending several days in tight consolidative ranges. Among others, Bitcoin and Ethereum in particular looked strong and both cryptos have now extended their gains. Bitcoin Cash, Litecoin, Ripple and Neo have all gained ground, too. There was no obvious trigger behind the rally, but the selling did look overdone and a bounce back was long overdue.
There was definitely a case of pent up demand: as prices corrected after their upsurge in 2017, undoubtedly a lot of people who had missed out on that rally probably saw the pullback as an opportunity to buy at relatively cheaper price levels. Eventually the net buying volume exceeded that of selling and prices had to go up in search of liquidity.
The increased level of investor anxiety about the rising war of words between the US and Russia as a result of the situation in Syria may have also supported the digital currencies. Indeed, some investors view cryptos as the ultimate alternative to fiat currencies. Some would even go as far as to say digital currencies are better than gold and silver. After all, the metals can be manipulated easily by central banks. Cryptos on the other hand are independent of any central bank or government intervention – at least for now anyway.
However, all that being said, Thursday’s sharp gains does not necessarily mean prices will continue pushing higher now, even if that’s what we and others might think. Indeed, it is not uncommon in bear trends to see sharp short-term counter-trend moves every now and again. Typically, these types of moves in bear trends last several days before the downtrend resumes. It is definitely worth bearing in mind that not everyone believes in the crypto hype and some have even seen Bitcoin’s past astronomical rise as an opportunity to take the opposite view and short it. Still, given the extent of the recent declines, we may see at least a sizeable bounce before the selling probably resumes.
In fact, Bitcoin’s technical outlook has improved a little for the bulls. The long-term bullish trend line at around $7000 has been reclaimed after a brief breakdown and now the medium-term bearish trend line has been taken out. The signs were there for cryptos to make a comeback after we highlighted the possibility for Ethereum to rebound in an article earlier in the week.
As far as BTC/USD is concerned, it still needs to break the structure of lower lows and lower highs before we can become confident that the rally will be sustained. The most recent swing high is at around $9200. A clean break above this level would thus be a bullish development. For now, therefore, bullish market participants need to remain very open minded and treat this bounce with a degree or two of caution i.e. ‘guilty until proven innocent’ rather than ‘innocent until proven guilty’.
h3 Bitcoin Daily /h3
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