Bitcoin Market Updates and Developments This Summer

Bitcoin Market Updates and Developments This Summer

Since mid-March Bitcoin had an impressive run, defying all pessimistic expectations and reaching the $10,000 mark, in a period when the world has to deal with a global economic crisis. It seems like investors had favored cryptocurrencies as opposed to fiat and that gave Bitcoin a solid boost on the upside. This technical analysis will focus on the broad market picture for BTC, where is it headed, and what are some of the most important downside risks to take into account moving forward.

Bitcoin in Consolidation Phase

As it can be noticed from the chart below, the Bitcoin price managed to break above a triangle formation that goes back to December 2018. This price action development suggests buyers are in control over the order flow and we could see some more gains on the upside.

Bitcoin chart analysis
Source: tradingview.com

However, so far there is no impulsive follow-through buying, which means buyers had taken a break until more reasons to buy will show up. The price is still trading above the daily 200 simple moving average, a bullish sign, but as long as it will continue to consolidate, the next likely direction is still under a question mark.

Still, breaking the triangle on the upside is a major price action development, considering Bitcoin had been trading inside that structure for more than a year and a half. At this point, market participants should be careful, because BTC can go either way.

The Next Likely Direction for Bitcoin

Bitcoin CFD
Source: ForexBrokers

Breaking the triangle on the upside had given buyers a slight advantage, which is why we currently see the price consolidating mildly, as compared to the bullish impulsive move since March. However, false-breakout setups can occur even in the Bitcoin CFD market. Ironically, the price is currently consolidating in what looks like a smaller triangle pattern and it will be the break of that structure communicating the next direction of the price action.

An upside break will revive more buying power and it could mean buyers will pick up enough momentum to finally break above the $10,000 key resistance area. If that happens, the next significant resistance area will be located around $11,500 – $12,000.

If the small triangle will be broken on the downside, sellers will gain near term control and the upper line of the major triangle formation could be retested again. That’s a key support area, considering the daily 200 MA is also located there. If the price moves impulsively below and breaks back inside the triangle, it would be a major bearish sign.

Risks to the Downside Persistent

Although the bullish scenario is slightly more favored, risks to the downside should not be ignored. In the past few months, Bitcoin and the entire cryptocurrency market had reacted to weakness in the stock markets. In case stocks start to ease lower, a similar scenario could occur with Bitcoin, if correlation continues. Another significant factor has to do with the second wave of a pandemic. That will put a dent on economic activity and hopes for a V-shaped recovery will gradually dissipate. The risk sentiment will continue to be fragile and the market is expected to react aggressively to any important headline.

Featured image: Mashable SEA

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