- Jay Smith
Bitcoin's 2020 bull run - Where next?
It's been a while since I've given a major update on $BTC .
After the crypto winter turned into an ice age things are beginning to thaw at last. Bitcoin looks stable at around 10k, although it's possibly a little too early to say that. I'd actually take a step further and say that I believe we could be pushing towards 12k sooner than most people expect.
I'll explain why with a chart that almost certainly has too many lines on it. For those who don't follow TA or understand it much, I'll try to explain the best I can.
Here's the chart:
To begin with, let's get our bearings. This is a daily chart (each candle is 1 day) of Bitcoin against the USD.
I have 3 moving averages setup (pink/blue/purple wavy lines) 20/50/200 set at day respectively.
Orange lines are trend lines I've drawn (the top 2 could have just been a channel, but this was easier to see).
White lines are support/resistance levels, the purple blob on the right is a channel, and then we have the RSI at the bottom.
The bottom trend line shows our course since the lows back in December 2018 at around $3200.
The consolidation period lasted almost 5 months before we broke out in April, and got a golden cross on the 200/20 and then the 200/50 moving average a few weeks later when things really accelerated.
If we look at those same moving averages in 2020 we can see that first the 50/20 had a golden cross just after the year started, triggering this current rally you can see in the purple channel. As we rolled into February the 200 finally caught up with the 20 giving another golden cross and importantly falling below the candles. As I post this now we are perhaps just a day or 2 away from the final golden cross, where the 200 and 50 will cross.
Moving averages are one of my favourite indicators because they interact with not only each other, but also the candles. If you look at the current rally you can clearly see that the pink 20 MA has offered support to the price throughout, and still sits a little below the price even after the fall from this weekend. If you load up your own charts and zoom out you'll see both the 50MA and 200 doing the same job numerous times.
So, moving averages look bullish, unless we see a big red candle within the next day or so that pulls us below the 20 MA.
Going back to trend lines, the channel I drew starting back in July was broken out of right as we crossed the 200 MA in late January. Since it's now been several weeks, it's clear that we're unlikely to fall back into it any time soon.
The channel I drew in purple, the current rally, also looks very healthy. We've hit the top of it 5 times now, bouncing back to the bottom, which we've also hit 5 times now. Since there isn't a particularly strong support/resistance level at this price, and we have the support of the 20MA I suspect we will continue trading in this range and make our way back up to the top of the channel again in another week or so.
The bounces we've had within the channel also correspond almost perfectly with the numerous support/resistance levels marked in white. we pushed beyond the 10k resistance and stopped at the 10.5k level before falling back down. What's interesting is that between 10.5k and 12k there really is no well-defined support/resistance level, debatably there's one at around 11.2k dating back to the beginning of the bear marketing in early 2018.
Finally, there's the RSI. It's been bullish all year and is still following the trend line drawn in orange.
So, to summarize: I'm bullish.
I drew a very rough wiggly green line displaying where I believe the price is likely to go if this does play out, but before we get ahead of ourselves, let's study what we need to be watching for this to remain valid.
What adds validation:
1. Holding above the 20MA
2. Holding within the purple channel
3. 200/50MA golden cross actually crosses (at a good angle, not shallow)
4. RSI trendline holds strong
5. we pull back above 10k this week
What invalidates the prediction:
1. Golden cross takes too long, angle shallows
2. We fall out of the purple channel
3. Black swan (not much we can do about that)
I'd say I'm around 80% confident that this trade will play out.
A lot of you ask me what fundamentals are driving this rally, there are a few, but I must stress that I am not as confident in fundamentals holding us in this rally compared with fundamentals.
The rally started after the US/Iran strikes back in January. Coronavirus is likely adding some fuel as some traders are getting itchy as central banks pump more money into the markets to keep everything afloat. The halving is also only a few months away now, but trying to project price movement around it is difficult, it appears to always turn bullish, but the timing is different every time.
That's all for this update, I'm also aiming to write something about Bitcoin dominance and altcoins later in the week.