Bitcoin’s $50K Tug-of-War and the Double Bottom Springboard
by Bogdan Giulvezan
Since Wednesday’s big drop, Bitcoin has been hugging the $50,000 level in what looks like a tug of war between the bulls and bears. It is currently trading at $49,950, after rebounding from $45,700 lows.
The initial drop was mainly caused by the “breakup” between Tesla and Bitcoin, when the former decided to halt the use of the latter as payment for its electric vehicles, due to environmental concerns. Elon Musk tweeted “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel”. He continued by adding that “cryptocurrency is a good idea on many levels and we believe it has a promising future but this cannot come at great cost to the environment”. That’s almost ironic, considering how much fuel his SpaceX program burns on every flight test, but let’s not go there.
Adding to the weakness was a regulatory inquiry launched by U.S. authorities into the crypto giant Binance. Thursday, Bloomberg reported that the U.S. Internal Revenue Service and the Justice Department are gathering information about Binance’s business and regulatory compliance.
As usual, when Bitcoin is under bearish pressure, the rest of the crypto market follows and that’s exactly the case now. Ethereum is trading at $3,870, recovering from session lows in the $3,500 area, Binance’s BNB is trading at $595 after visiting lows in the $510 area and even DOGE lost around 16% over the last 7 days, now trading at $0.52.
Chart Analysis – BTC/USD
During the last 7 days, Bitcoin slipped 11% lower and is now trading right on the $50,000 mark, with the MACD and the Relative Strength Index headed south. Despite this weakness, it’s important to note that the pair has recovered from $45K lows and that the last closed daily candle shows a long wick in its lower side, which is a sign of rejection.
It is also worth mentioning that price created a double bottom pattern on the $47,000 level and although it’s not a perfect double bottom, it is still a bullish formation. If Bitcoin can reclaim support at $50,000, the chances of a climb above the 50 days Moving Average (blue line) will increase. A strong daily bullish candle closed above the mentioned level would confirm the bounce, thus opening the door for higher prices.
Although the trend is still bullish from a longer-term perspective, the pair formed a lower high and resistance at $59,000, which are bearish signs. In other words, don’t jump in and wait for a clearer picture.