BOTS crypto news week 8
It was a red week for the entire cryptocurrency market. Bitcoin lost more than 20% of its value and some alt coins even lost more than 50%. Cryptocurrencies were not the only asset class which suffered this week, as the stock market also did badly. The correction in both markets was probably caused by the rise in bond yields in the United States. It is perfectly normal for financial markets to cool down after huge price rises. In this market update, we will look at where Bitcoin may find its bottom and what it looks like for Ethereum.
By: Steven Eblé
In the previous market update, I indicated that Bitcoin was likely to test the top of the ascending broadening wedge, around 58,500 US dollars, before a minor correction came. Bitcoin did indeed test the upper line of the ascending broadening wedge and rose to around 58,500 US dollars before a correction followed. The correction was more severe than I expected. Bitcoin even broke out of the ascending broadening wedge bearishly. But what does this bearish breakout mean for the Bitcoin price?
The previous high of bitcoin from January this year is a spot where Bitcoin is likely to find support. This region is located between 42,000 US dollars and 40,000 US dollars (yellow bar). This price level was tested three times in the month of January and acted as resistance at that time. If Bitcoin can now test this region as support it would be a bullish retest.
In the chart below you can clearly see a diagnal resistance (indicated with a blue line). You can also see that the Bitcoin price is making lower lows, while both oscillators are making higher highs. This is called a bullish divergence. One could conclude from this that bears are losing strength and bulls are taking control of the market again.
Should the diagnal resistance not be broken and the bullish divergence not work out, Bitcoin will likely be tested in the region around 42,000 US dollars. If the diagnostic resistance does break then 50,000 US dollars could be the next station.
All in all, this correction is very healthy for the market. Many indicators are being reset and price levels are being tested for support. As long as bitcoin continues to make higher lows and higher highs there is no reason to panic.
In my previous two weekly updates, I indicated that the strength was in Bitcoin and not Ethereum. This week confirmed that, as Ethereum fell harder than Bitcoin, by nearly 35%. Many people are now wondering when Ethereum can start gaining ground against Bitcoin again. My take on that is as follows.
The chart below shows that Ethereum is at a key support level, namely the previous high of December 2017. It is very important for Ethereum that this support zone holds. As long as this support zone holds, continuation of the trend is likely.
In fact, I find it plausible that Ethereum could outperform Bitcoin just as it did in early January, as Bitcoin often begins a period of consolidation after a correction. And during periods when Bitcoin's volatility is low, Ethereum does best.
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