• Francisco Hernandez

Bitcoin preparing to conquer $10,500

Introduction

Bitcoin is inching higher and higher, but price is still ~10% shy from the year-to-date (YTD) high. It is important for Bitcoin to conquer this ~$10,500 area before any major price movements (as predicted by a couple models). It is important because this area has been a key area of support and resistance in the past (see second image). Before Bitcoin can take this on, it must first prepare and establish a good support in the current environment.

Bitcoin daily chart, year-to-date.


There is evidence on the charts that suggest Bitcoin is establishing some level of support.

Should it hold, Bitcoin would be ready to face the next level. Regarding levels, I will now look at the Fibonacci retracements.

Critical areas at $10,500.


Fibonacci retracements

According to the Fibonacci retracements, price is sitting on the first retracement level of 23.6%, or $8,953.24, after recovering from the low. Bitcoin has been roughly testing this price area since early May. I want to see price settle around this area first before approaching the ~$10,500 area. Right now, price action is bullish, a recovery from last weeks correction. The heikin-ashi technique confirms this trend.

Fibonacci retracements.


Heikin-ashi

Last week, using the heikin-ashi technique, I was able to identify that Bitcoin had entered into a downward trend based on the candle of May 21st. That downward trend started to end with the May 26th candle, a little red candle with wicks above and below. The following day, a green candles shows. The upward trend will be confirmed depending on how today's candle closes. In the candles current position, a close here would indicate the start of an upward trend. This is evident with the large green candle with no bottom wick. Should the candle's body diminish, I would question whether or not Bitcoin has entered an upward trend.

Heikin-ashi technique.


Moving averages

I want to touch on the golden cross that occurred last week. I doubted that this golden cross would result in any significant moves given that there had already been a major golden cross only a few months back (not to mention one occurred last month too). However, the charts are suggesting that price is behaving as it should with the golden cross that just occurred. Price is above all the moving averages, and hovering over the 20-day moving average (red).

Moving Averages.


On balance volume The OBV has also been recovering, although it has been moving horizontally. The OBV has also been making a series of higher lows. It has failed to make a higher high in the last few weeks. More horizontal movement could be in store.

OBV.


Chaikin money flow

The CMF is showing a similar story in regards to the higher lows and the failure to make a higher high. The CMF is just about at the zero line, indicating neutral buying and selling pressure. If the upward trend is confirmed after today’s candle, then I think the CMF is likely to break up over the zero line.

CMF.


MACD

The MACD turned bearish in the last week and is beginning to look bullish. The MACD line (red) is approaching the signal line (blue) and the histogram has consolidated. Bitcoin will need a few more days to see how the MACD plays out.

MACD.


Conclusion

Bitcoin is in an OK spot in the current environment. Price seems to have found a good area for support with the moving averages and the Fibonacci retracement. I want to see Bitcoin establish one more support point anywhere around current prices or down to $9,000. Should support form here, Bitcoin would be prepped to face the $10,500 area. All this comes a couple weeks after the 2020 Halving. It was expected to see a price drop along with the hypothesized drop off in miner hash rate. However, price appears to be rising along with hash rate. Of course, this is likely due to the Bitcoin difficulty adjustment, which has dropped once already since the Halving. According to Bitcoin Difficulty Estimator (by /u/archaeal), the next difficulty adjustment is predicted to drop ~11-14% around June 4-5. I will also be keeping an eye on hashrate and difficulty because these factors can influence price and may not have yet played all the way through.

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