The world’s biggest cryptocurrency, bitcoin, failed to break out from the $40,000 level this week, and after four days of continuous fall slumped towards the $37,000 level on Wednesday. However, technical charts suggest that the overall crypto market may end consolidation sooner than later.
The broader market’s Bollinger bands, which measures a standard deviation move from its 20-day simple moving average, have started to contract over the past few weeks.
“Historically, contractions foreshadow an inevitable revival in market volatility. Now, whether we see market volatility jump higher in a week or a month is unclear. But it is fair to say that the consolidation we’ve seen over the past few weeks has to presumably end sooner or later,” Kraken Research said in a note.
According to the note, bitcoin’s inability to hold the $40,000 level as support should come as no surprise, as historical price action suggests that the bulls are likely to struggle to get back above the $40,000- $42,000 resistance.
Bitcoin has been range-bound this week, trading between $35,000 to $40,500. The asset had a rebound of around 8.5% around mid-week and rose to the $41,300 zone.
As per cryptocurrency exchange ZebPay, the market stance has been bullish for the asset, and volumes have persisted at good levels.
“Another tweet by Tesla CEO Elon Musk suggested that Tesla would accept bitcoin as a means of transactions when miners who verify transactions use more renewable energy, leading to this uptrend. As the asset continues to ride the upward trend, whales seem to be accumulating in anticipation of higher prices, making bitcoin again the favorite of them all,” said Nirmal Ranga, vice-president of Trading, ZebPay.
Bitcoin last week made a ‘Dragonfly Doji’ (Trend Reversal) pattern where the lower longer shadow indicated buying at the support zone of $31,000 and has surged almost 33.2% making the weekly high of $41,322.
“Technically, on a daily time frame, the asset has yet again faced resistance around these levels and made a ‘Spinning Top’ candle that makes it difficult to predict which way the asset will swing in the immediate future. The prices have retraced almost by 10%, in the past 2 days. For a further rally to take place, bitcoin needs to trade and close above the resistance of $42,500,” Ranga added.
Bitcoin’s first key support is at $34,635 and then $31,111, while the initial resistance is at $40,900 and then at the $42,500 level.
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