After laboring through a prolonged correction for much of last year, bitcoin has lately been defying gravity and looks to keep taking out fresh highs. Bitcoin price crossed the one-year high of $8,940 on Monday morning before retracing slightly to settle at $8,800 at Luxembourg-based Bitstamp. However, the general feeling is that any pullbacks at this juncture are likely short-lived and the bulls remain firmly in control.
Bitcoin has surged more than 140 percent in the year-to-date.
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Source: TradingView
Improving sentiment
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Source: TradingView
Bitcoin’s steady climb appears to be due to improving crypto sentiment. Bitcoin's RSI (Relative Strength Index), a tool used to gauge momentum behind asset prices, is hovering at the highest levels since the beginning of 2018—shortly after BTC hit all-time highs. Two weeks ago, analysts at Canaccord Genuity predicted that bitcoin is going to rally hard over the next 24 months, potentially returning to its Dec. 2018 all-time high of nearly $20k due to next year’s halving event where miner reward will be cut in half.
"Bitcoin has started to form the spring 2019 bottom we began mentioning last year, although a close look at the chart suggests the recovery may be slightly ahead of itself. Looking ahead, if bitcoin were to continue following the same trend, the implication is a slow climb back toward its all-time high of ~$20,000, theoretically reaching that level in March 2021,” they wrote in a research note.
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The halving of bitcoin’s mining reward occurs every four years with the next event—the third in the digital coin’s history-- expected to take place on May 20, 2020.
Bitcoin block reward was initially 50BTC before it was halved to 25 BTC then again to the current rate of 12.5 BTC. Block reward halving tends to have a positive long-term effect on BTC price simply because of the law of supply and demand—the harder it is to mine BTC, the more valuable it becomes. Next year’s event will be even more significant than its predecessors because of much higher public awareness as well as increased institutional participation.
Short-term bullish
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Source: CoinDesk
Bitcoin’s short-term outlook appears equally bullish.
On Sunday, BTC price closed above the May 16 high of $8,390 thus confirming a pennant breakout—a continuation pattern that tends to accelerate a preceding bullish move.
A pennant breakout is frequently followed by an upward move roughly the length of the pennant’s pole—that is the height of preceding bullish move, in this case, $5,562 to $8,390. Bitcoin, therefore, has quite a good scope to rally to the key psychological resistance of $10,000 in the near-term.
Further, both the 5- and 10-day moving averages at $8,288 and $8,048, respectively, are trending north, a short-term bullish setup. These levels could reverse any potential pullbacks.
BTC is likely to soon break above $9,000 and may hit the 38.2-percent Fibonacci retracement of the Dec. 2017 to Dec. 2018 selloff at $9,442. However, it’s worth noting that pullbacks due to profit-taking tend to accompany such strong rallies, meaning BTC could revisit former resistance levels at $8,390-$8,000 before eventually rallying to $9,442.
By Alex Kimani for SafeHaven.com
