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Lower Lows Play out for Bitcoin
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Another tough week for Bitcoin with a couple of rallies and strong rejections.
Bitcoin keeps getting rejected
This past week, Bitcoin (BTC) traded between USD3,340 and USD3,480. We started off with a bullish run to USD3,480 that pierced the 20 (yellow line), 40 (red line), and 200 (green line) EMAs on the 1-hour chart.
Following the break of the EMA200, BTC was unable to maintain bullish momentum and subsequently retraced down to USD3,390 before making a second run up to USD3,440.
Notice the trend of lower highs and lower lows along with the momentum leading up to the tests of the EMA200 (A, B, and C).
The first touch (A) of the EMA200 on the 1-hour chart took the form of a large bullish candle, while the second touch (B) was made by a long upper wick, indicating heavy rejection.
At the moment, BTC appears to be heading upward for a third touch. If BTC continues this trend of testing the EMA200 while making lower highs and lower lows on the 1-hour chart, we can expect a fairly weak test (C) before heading down for a lower low.
We can see a similar trend playing out on the 4-hour chart where BTC’s bullish breaks appear to be getting less intense over the last few weeks. On the 4-hour chart, BTC is routinely testing the EMA40 without a success break.
The situation is looking more and more bearish as BTC drifts farther away from the EMA200 on higher time frames.
Finally, BTC’s daily chart indicates that Bitcoin has retraced down to the 0.786 Fibonacci level after reaching a local high at the end of 2018.
Since breaking through EMA20 and EMA40 in the second week of January with a large bearish candle, BTC has been experiencing heavy resistance along the EMA20 line over the past few weeks.
For the most part, BTC has wicked past the 0.786 level, and a strong bullish daily candle seems to be forming.
If BTC is unable to break the EMA20 and EMA40 resistance, a further retracement to form a double bottom around USD3,100 (probably a high demand zone) is a possibility.
This past week, Ethereum (ETH) traded between USD100 and USD108. Like BTC, ETH has been testing the same EMAs across multiple time frames, but with a slightly more bullish bias.
On the 1-hour chart, ETH has broken through the EMA200 with conviction.
The key factor to pay attention to now is if ETH can form a higher local high above USD109 and find support on the EMA200 line following a retrace.
If this happens, we may see ETH make a move to test higher period EMAs on higher time frame charts (e.g. EMA200 on the 4-hour chart).
On ETH’s 4-hour chart, we can see a clear break through the EMA20 and EMA40 lines, while BTC was unable to break the EMA40 on the same time frame.
Unlike BTC, ETH did not retrace to the 0.786 level–at least, not yet. This indicates that there is currently less sell pressure on ETH.
However, both assets have been unable to break the long term downtrend, so once again, a double bottom formation is a likely possibility.
Looking at the wider market, the top gainers in the Top 50 included LTC and ICX, all registering double digit gains over the last seven day period.
Litecoin’s 17% gain can likely be attributed to a recent announcement regarding a possible collaboration with Beam, a privacy-focused project to implement MimbleWimble, which would allow LTC users to transact with a fungible and private variant of LTC.
This privacy implementation would make LTC transactions more difficult to track, and would give it similar properties to XMR in terms of token fungibility.
In general, the crypto markets are still trading in a tight range with a slight bullish bias. Over the next week or two, it’ll be interesting to see if BTC can maintain its head above the 0.786 Fibonacci level.
Without a significant bullish catalyst, a double bottom may just be the highest probability play for the moment.