bitcoin price rallyThe bitcoin price is on fire today, but traders need to keep an eye out for several key levels. | Source: ShutterstockThe Bitcoin Price is Booming, But Here’s Why You Shouldn’t Get Too Excited.
The bitcoin price on Friday posted one of its most robust bullish sessions in weeks as it rose as much as 10.5 percent in just twelve hours.
The bitcoin-to-dollar exchange rate (BTC/USD) established a higher high towards $3,710, up 10.38 percent from the Asian session open. It was not a matter of technicals only; the fundamentals also played an important role in catalyzing the ongoing bitcoin bull run.
Robert J. Jackson Jr., a commissioner at the US Securities and Exchange Commission (SEC), said in an interview that the regulatory agency would eventually approve a bitcoin ETF. The news, it seems, helped bitcoin revive its bullish sentiment.
As of now, BTC/USD is trending inside an overbought territory. The pair expects to correct lower as the market heads out of the US session.
BITCOIN BROKE ITS WEDGE, BUT WHAT HAPPENS NOW?
The falling wedge pattern mentioned in our previous analysis validated its presence. As CCN reported, the bitcoin price did break above the wedge resistance and overperformed its upside momentum by jumping above its 4H 200-period moving average. As a result, our intraday long positions brought home a decent profit.
BITCOIN, BTC USD
BITCOIN 4H CHART | SOURCE: COINBASE, TRADINGVIEW.COM
However, the surge does not guarantee a bullish revival in the long-term. Bitcoin first needs to establish a support area to ensure that what we witnessed was not a false breakout. The ongoing correction is giving us plenty of potential floors, beginning with the $3,600-level. If this area is broken to the downside, then the price could target the 4H 200-period moving average (depicted in red) for a potential pullback.
BITCOIN, BTC USD
BITCOIN 1D CHART | SOURCE: COINBASE, TRADINGVIEW.COM
Meanwhile, it is essential to see how the previous falling wedge formation worked out for bitcoin. Between November 24 and December 15, BTC/USD was trending inside a falling wedge. After reaching the apex, the pair attempted a successful breakout action – also confirmed by increased trading volume – to reclaim $4,412. It fell just short and pulled back from $4,235, the level which now serves as the breakout target for the current wedge formation.
Therefore, unless bitcoin breaks above $4,235 – or even $4,116 – then, according to our theory, it would remain inside a false breakout area, which is hardly bullish.