- After witnessing a massive rally on Wednesday, Bitcoin is currently consolidating in the range of USD 8,500 to USD 8,900.
- As technical analysts note, the bears could currently regain control of the market. However, the momentum on the spot market contradicts this.
With the massive rally on Wednesday, Bitcoin has made up for all the losses of the “Black Thursday” of mid-March and recorded the third-largest price increase in a single day. After the Bitcoin price was still below 7,800 USD on Wednesday morning (UTC), it rose to over 8,800 USD by the end of the day. The rally continued yesterday, reaching as high as $9,500 before a sharp consolidation took place, causing a massive wick on the 1-day chart. At the time of writing, Bitcoin is trading at $8,804 and seems to have halted the downward correction for now.
Nevertheless, analysts see some factors that could argue for the bears to regain control. Most notably, technical analysts are citing yesterday’s “doji candle” on the daily chart, which is characterized by the opening and closing price being nearly equal. The doji candle in the technical chart analysis represents indecisiveness in the market and could currently indicate a return to a bearish trend.
However, the consolidation after the massive rally is not unusual either. As Josh Rager, a popular technical analyst on Twitter writes, there are some important levels to watch. Via his current tweet, Rager drew a bullish and a bearish scenario:
Bullish – price bounced hard off $8400 support and could have a run-up to retest $9000s again, looks good on LTF
Bearish – if unable to break $9300 4hr close, this could make a new lower-high, overbought on oscillators, BTC hit key levels & 7 weeks of green, pullback time?
The popular analyst “Credible Crypto” shared another analysis and explained that the area before Wednesday’s pump will be crucial in determining whether Bitcoin remains in bullish territory or goes into a bearish trend:
7.8-8.2k BTC is the proverbial “line in the sand”. We hold it, we continue up to 10k+. We lose it, the doors open to 6.2k and 5.3k. I expect we hold it and continue up. If you want to buy the dip, 7.8-8.2k is the place to do it.
Meanwhile, some experts continue to highlight Bitcoin’s strong correlation with the S&P500, so Bitcoin could be at risk of being affected by a possible further crash in the stock market. Although Bitcoin has been able to outperform the traditional market by far with Wednesday’s rally, Cantering Clark, partner at Phemex.Trade, notes that Bitcoin “is not suddenly independent of the same bidding behavior seen in traditional markets.
Richard Galvin, CEO of Digital Asset Capital Management confirmed this and shared a chart explaining that the correlation between Bitcoin and the S&P500 remains at unprecedented levels. At the same time, he shared his opinion that it is unlikely that the correlation will remain in the medium term.
2/ Correlation between Bitcoin and the S&P500 remains at unprecedented levels – whilst we believe this is unlikely to persist in the medium-term, it necessitates employing macro thinking to digital asset investing pic.twitter.com/g4d2rzmkOc
— Richard Galvin (@richwgalvin) April 30, 2020
Spot market shows bullish momentum for Bitcoin
However, there is also a very good reason why Bitcoin could continue its bullish movement. Spot market data shows that Wednesday’s rally was almost entirely driven by small investors buying in the sports market. Mohit Sorout, Partner at Bitazu Capital, pointed this out in a tweet.
Bitmex OI hits a new All Time Low. This $btc rally was purely a spot dominated ripper.
— Mohit Sorout 📈 (@singhsoro) April 30, 2020
On the one hand, this is a great similarity to the 2017 bull run, on the other hand, the growing interest from small investors points to a rising adoption curve. This in turn could lead to a decoupling from the traditional markets to end the correlation with the S&P500.