Bitcoin is again approaching the $5,000 mark, which is a strong psychological resistance level. Usually, there are huge sell walls around round prices. For example $3,000, $4,000 and $5,000. For the past 2 times where bitcoin approached $5,000, the price has dropped dramatically, mostly due to traders taking profit. Rather than setting a sell order at exactly $5,000, people tend to set an order slightly lower than $5k to get ahead in line in order to have their orders filled, which causes the drop. As the price drops, traders fear that the price may drop further, resulting in more traders taking profit, causing a bigger selloff.
Bitcoin Fundamentals
Bitcoin prices are going up due to 4 main reasons.
- Bitcoin Gold - Possibly free money like Bitcoin Cash. People will receive Bitcoin Gold equalled to the amount of bitcoin they are holding at the time of the fork
- Segwit2X - Which is another hardfork like Bitcoin Gold and Bitcoin Cash. Less likely that there would be free money unless there is miner support for the legacy chain after the split.
- China - After the ban on exchanges, there's no other bad news expected. Unless the government bans bitcoin mining, any other news coming out of China should either be neutral or positive for the Bitcoin price
- Adoption & Awareness - We see articles about Bitcoin on popular news sites like Bloomberg and Wall Street Journal. We hear governments around the world wanting to regulate Bitcoin, indicating that people are definitely interested in crypto-currencies. In addition, more and more companies are starting to accept bitcoin as payment.
Technical Analysis
- There's a slight dip in price after Bitcoin approached $5,000. The dip was expected as it entered overbought territory on the RSI index (A RSI reading of over 70 is considered overbought which means a dip will be coming)
- Expect a retracement to $4,500 support level due to profit taking. $4,500 was the previous resistance level. Usually old resistance levels become new support levels
- MACD is still signalling a bullish trend
- An ascending triangle trend is forming, indicating a possible breakout over $5,000
- High chance that $5,000 could be breached before the Bitcoin Gold fork on October 25 or after Segwit2X as uncertainty will decrease