Bitcoin - Summer Doldrums And The Open Gap At $8,500

Review

Since our last analysis, Bitcoin has continued its correction as expected. Back then, we called a potential target zone between US$7,000 and US$9,000. This zone was almost reached on July 17, with the lows at US$9,050.

After prices rebounded from the broad support zone between US$8,600 to US$9,100 with a low of US$9,111 on July 28, market participants took more courage again. Within less than two weeks of trading, prices jumped up significantly and reached US$12,325 on August 6 almost within sight of the annual high at US$13,880. However, over the past ten days, Bitcoin prices have slipped south again and are currently trading at US$10,000.

Overall, a broad-based consolidation at high levels and a flat downward trend channel have emerged in the last one and a half months. So far, there is a series of lower highs, while at the same time volatility has retreated due to the summer trading season. Considering the sharp and impressive rally from movement US$3,125 to US$13,880 (+ 344%), the current correction remains modest and healthy with the maximum pullback being 34.8% so far.

Technical Analysis For Bitcoin

Bitcoin in US-Dollar, weekly chart as of August 15th,2019. Source: Tradingview

On the weekly chart, the overall extremely bullish setup is obvious. Bitcoin has risen from US$0.008 to nearly US$20,000 in just under 10 years, far outperforming all other asset classes. It is very likely that this unique performance will continue in the coming years.

In the next two months, however, new all-time highs are not foreseeable. Rather, Bitcoin is in a consolidation at high levels, which seems not yet completed. It is therefore more likely that prices will continue to bounce back and forth with a tough and confusing sideways movement. With Bitcoin futures having an open gap at US$8,500, a new low within the current correction cycle is also conceivable. However, prices below US$6,500, are extremely unlikely. 

Bitcoin in US-Dollar, daily chart as of August 15th, 2019. Source: Tradingview

The daily chart captures the price movements of the last three and a half months. Since the high of US$13,887, a series of lower highs has been established, while at the bottom, the support zone between US$8,600 and US$9,100 has been tested only once.

With the recent sell-signal from the Stochastic Oscillator, Bitcoin has now fallen back within the relatively shallow downtrend channel below US$10,000. As this psychological number has not stop the sell-off, the open gap in the Bitcoin Futures is likely to attract prices at around US$8,500 US dollars. Depending on how long the consolidation process will take, the 200-day-moving-average (7,042) could rise towards this price area until end of September.

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