New Year crypto rally?

The news surrounding bitcoin and the other major cryptocurrencies has followed a classic bear market pattern over the past year. When we first started to delcine there was a resounding chorus of “Buying Opportunity”. The crowd was still enthusiastic, new buyers still flooding in and the forecasts were still for a bitcoin price of $30,000, $50,000, $100,000 by the end of 2018.

As the decline gathered pace the tone changed slightly and people talked of a well needed correction, more sustainable price action and so on. Capitulation was still a long way from the forefront.

The break from the range that established  in the summer, with a floor between $5500 and $6000 has changed that. We are now hearing talk of the total demise of cryptocurrencies. People are again talking about how long before the authorities close the chapter on all cryptos which are “clearly ponzi schemes” (do these people actually understand what a Ponzi scheme is?).

This negative sentiment is, ironically, exactly what was needed to start to establish a base in the crypto space (or at least the leading cryptocurrencies). We are for the first time in a while starting to see a base form which may form the basis for a sustainable rally.

The chart for bitcoin is starting to show some encouraging technical signs that should lead to at least a medium term rally even if it’s too early to call the overall end of the bear market.

The chart shows classic signs of oversold behaviour:

  1. First in late November we saw a break of the “meltdown” trendline that had formed after the break below $5500.
  2. Yesterday saw a break of the gentler downtrend that took hold for the past 2 1/2 weeks. 
  3. The declining volume pattern as we continued the decline was broken yesterday as the price spiked higher accompanied by higher volume.

While early days this forms an encouraging backdrop, especially combined with the extreme oversold readings we have been seeing for the past month.

Will this form the base for this market? Unfortunately there is no way of knowing at this stage. What we can say is this is an encouraging technical picture which could easily see the market retrace some of the recent move back up to the $5000 level.

A good entry level into the market would be either a retracement back to $3500 or, if it breaks higher then enter on a move above $3750. Position stops should be placed at new lows for this move ($3200) with a traget of $5000. All price levels are basis the BTC/USD exchange rate.

This article is for information purposes only. Neither Digital Finance News or the author are providing this as investment or trading advice or a recommendation to purchase or sell any cryptocurrency or any security. Investors should take independent advice before making trade or investment decisions. 

About Sean Williams 109 Articles
I'm markets editor and journalist for DFN. I've been involved with crypto for over 4 years and am an enthusiastic advocate. At DFN I try and combine my knowledge of markets with my knowledge of crypto to give a good overview of changes in the financial aspects of cryptocurrencies.

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