Bitcoin (BTC) May See A Pullback After $5,700 Run, Technicals Hint
Bitcoin May Currently Be Overextended
The past 48 hours for Bitcoin (BTC) have been stellar. Last week saw news reveal that both Bitfinex and Tether Limited, two integral facets to the cryptocurrency market, are both potentially in a precarious legal and financial situation, leading to a rapid 10% collapse in BTC. However, since that date, bulls have begun to take control yet again, as exemplified by Thursday’s 7% rally past $5,700. One analyst, who goes by the odd yet funny moniker “Magic Poop Cannon,” claims, however, that Bitcoin may rapidly cool.
In a recent Trading View analysis, Magic explained that there are a number of signs convincing him that BTC is currently overextended. He first looks at simple resistance levels, remarking that BTC is having trouble breaking and holding above $5,777, which acted as resistance in 2018. It was added that even if $5,777 is surmounted, $6,000 and $6,400 remain levels of interest for drawdowns.
What’s more is that the asset is currently having these troubles while a number of technical indicators, like the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are either reading “overbought” or are showing bearish divergences, hinting that a pullback is in the works.
Even more worrying is the Network Value to Transactions ratio (NVT). As Ethereum World News reported previously, Magic claims that each and every time that the NVT reads as it does now, it acted as a “powerful sell signal.” Per Magic, if historical precedent is followed, Bitcoin will fall to its 0.618 Fibonacci retracement, which sits around $4,100. He adds:
Most NVT weekly sell signals sent BTC even deeper than that. So, I think it is very realistic, from a technical perspective, that Bitcoin could fall dramatically… There is an ENORMOUSLY POWERFUL CEILING OF RESISTANCE all around 6000!
And Magic isn’t the only analyst bearish. Prior to Thursday’s Bitcoin rally past $5,700, Crypto Birb, a trader, explained that BTC’s weekly chart is “providing quite a strong warning signal for bulls.” He notes that the chart has seen a number of “spinning tops,” an often bearish candle structure that resembles a, uh, spinning top, that have yet to close above key resistance levels and far above the Ichimoku Cloud. Moreover, the Money Flow Index, a technical oscillator that weighs trading volume and price action to determine if an asset is overbought or oversold, is currently the highest it has been since December 2017, prior to the ongoing bear market.
All this short-term analysis aside, BTC remains under key long-term resistance levels. As Dave The Wave recently noted, his long-term model, which shows that a parabolic curve has depressed BTC throughout all of 2018, is currently accentuating that Bitcoin is currently encountering key resistance, and has yet to break through. In another chart, he noted that Bitcoin’s Moving Average Convergence Divergence (MACD) reading is currently “rolling over the zero line.” The last time BTC saw such similar action in this specific reading was when the cryptocurrency market saw one final capitulation event before heading decidedly upward.