Bitcoin is still looking upwards, having achieved fresh record highs overnight.
As per CoinDesk’s Bitcoin Price Index (BPI), the world’s largest cryptocurrency by market capitalization rose to an all-time high of $7,990 at 01:18 UTC. As of writing, bitcoin is trading at around $7,850.
The cryptocurrency has staged a remarkable “V” shaped recovery from the last week’s lows near $5,500, but will the rise and rise of bitcoin continue?
As noted yesterday, the investor community appears to be warming up to the idea of moving money out of equities and bonds and into bitcoin – sentiment arising from CME Group’s upcoming bitcoin futures listing.
The price action analysis suggests bitcoin now has the potential to rise well beyond the $8,000 mark, although there is merit in being only cautiously bullish.
The above chart shows:
- The rally to record highs is backed by a rise in trading volumes. A high volume rally is a sign that the trend has legs
- However, the money flow index (MFI), which uses both price and volume to measure buying/selling pressure, doesn’t reflect the “V” shaped recovery and remains flat. A bearish price-MFI divergence would be confirmed if bitcoin closes today on a weak note.
- The relative strength index (RSI) is well short of the overbought territory, thus there is scope for a further rally in bitcoin. However, again, a bearish divergence would be confirmed if bitcoin ends today with losses.
There are no signs of stress on the above chart, except for the overbought nature of the MFI and RSI.
- Bitcoin looks set to rise above $8,000 and test $$8,187.88 (161.8 percent Fibonacci extension level of the move from the Jul. low – Aug. high – Sep. low).
- Only a break below $6,457 (61.8 percent Fibonacci retracement level) would signal a short-term bearish trend reversal.
- Bearish Scenario: A pullback to $7,200-$7,000 cannot be ruled out if prices fail again to rise above the $8,000 mark. Watch out for bearish RSI and bearish MFI divergence.