Bitcoin failed in its last two attempts to break below the $8,000 level, creating a double bottom formation on its 1-hour chart. Price has yet to test the neckline around $8,800 and a break higher could draw more buyers in.
The chart pattern is around $700 tall so the resulting upside break could spur a rally of the same size. However, the 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. In addition, the moving averages might also hold as dynamic resistance.
RSI is on the move up to show that there’s still some bullish momentum left for a climb to $8,800 but the oscillator is nearing overbought conditions. This suggests that buyers could soon take a break and let sellers take over, possibly leading to another test of the bottoms.
A recovery in risk-taking helped support cryptocurrencies in recent trading sessions as trade war fears began to ease. So far, though, there have been no industry updates that could be enough to sustain a strong rally.
Meanwhile, the dollar remains supported by rate hike expectations as industrial production beat expectations. US building permits and housing starts dipped, but these didn’t seem to douse tightening hopes.
It looks like technical factors are mostly in play for bitcoin action these days as the downtrend line and rejection at another test of $9,000 has led to some profit-taking. The investigation into South Korea’s largest bitcoin exchange is also hurting sentiment as this brought back issues on regulation and security.
To top it off, a recently released study on the amount of energy that bitcoin mining consumes also drew some bearish pressure in. As it turned out, the entire bitcoin network could consume as much as 7.7 gigawatts of electricity by the end of this year.