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Bitcoin breaks resistance but lacks strength to confirm uptrend
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It’s been another red week in the cryptocurrency market. Last week, we discussed Bitcoin’s break of a major level of support at USD6,000 and how there isn’t a major support level until the USD3,200 area.
After finding temporary support in the USD4,200 area, Bitcoin experienced another downward high-volume move down to the USD3,600 area on November 25. Since then, Bitcoin has repeatedly tested USD3,600 for adequate support before a recent upward move past a level of resistance.
The two major levels to watch over the coming weeks are USD3,600 (orange) and USD4,200 (yellow). Over the last 48 hours, Bitcoin has managed to break USD4,200 – a previous level of temporary support.
Looking at the candle action, it’s easy to paint the recent move from USD3,600 to USD4,200 as bullish one. However, the volume profile tells a different story. Over the past week, periods of large volume have supported moves to the downside, but the buyback volume to the upside has been noticeably lacking.
The drop-off in volume during the resistance break at USD4,200 was followed by a double top in price with even less volume. With this in mind, it would be wise to watch this level very closely because this could be a possible bull trap.
In order for the bullish argument to continue, Bitcoin will have to form a strong support at USD4,200 over the coming days. If Bitcoin does fall through USD4,200 back to the downside, USD3,600 is the next level to watch. A fall below this level would likely bring Bitcoin to major support at the USD3,000-3,200 range.
As expected, the majority of altcoins followed BTC very closely over the past few days. XRP, which is still holding the number two position behind BTC, hit a low of USD0.328 while ETH fell to a double-digit low of USD98.20 (a price level which hasn’t been seen since May 2017).
Over the past 24 hours, a number of altcoins including TRX, ICX and ONT have posted gains up 40%. While gains like these are common for altcoins after major price drops, it’s crucial to keep monitor how BTC develops over the next few days. If BTC is unable to form strong support, altcoins could be in for another rollercoaster ride downward.