The analyst who called the May 2021 crypto market collapse says there’s now a case to be made for Bitcoin (BTC) to rally its way to the $135,000 level. The closely followed pseudonymous analyst known as Dave the Wave tells his 96,000 Twitter followers that based on one theory, BTC could top out roughly 229% […]
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MACD is green for the first time since Bitcoin's all-time highs, but a correction is the "most obvious" first step, one trader says.
Bitcoin (BTC) kept traders guessing later on Aug. 18 as one forecast said that a $40,000 dip would be the “most obvious” next move.
Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it ranged around the $45,000 mark on Wednesday, with no clear direction on lower timeframes.
A dip to $44,200 earlier on the day reversed upwards, but the pattern for the pair remained a cycle of lower highs on the hourly chart.
Therefore, Cointelegraph contributor Michaël van de Poppe concluded, a higher low construction marking a corrective phase could appear “quite quickly.”
“The most obvious case for the markets right now is that we’re going to have that corrective move somewhere towards the region of $39,000-$42,000,” he said in his latest YouTube update.
Van de Poppe added that the line in the sand for bulls was around $37,000, this marking the last higher low construction supporting Bitcoin in its current trading zone.
A “crucial breaker” to the upside, he subsequently said, was the $45,600 area, which at the time of writing was just several hundred dollars away.
Zooming out, and context provided bulls with some much-needed respite thanks to one key indicator flashing “buy.”
Related: 3 ways this Bitcoin bull run is different than late 2020
That came in the form of the weekly moving average convergence/ divergence (MACD) tool, which as of Aug. 8 had flashed green for the first time since Bitcoin was at its all-time highs of $64,500 in April.
MACD is a classic interpreting method for charting an asset’s overall trajectory. The last time such a green phase began was in early Q4 2020, corresponding with the springboard for the latest bull run to get going.
As popular Twitter commentator BTC Archive noted last week, a similar green event in 2019 led to considerable price appreciation.
The MACD indicator hints at a potential bullish crossover as Bitcoin’s price retests $40,000 as support.
A crossover between two Bitcoin (BTC) moving averages that appeared before the 2020 price boom is hinting at making a return in 2021, just as the flagship cryptocurrency eyes a bullish breakout from its current $30,000–$40,000 trading range.
The indicators in focus are the MACD Line and Signal Line. MACD is an acronym for Moving Average Convergence Divergence, and a MACD Line represents the difference between the 12- and 26-period moving averages. Meanwhile, a Signal Line is a nine-period moving average.
Plotting the MACD Line and Signal Line together forms the so-called MACD Indicator, which allows traders to predict future price trends. For example, when the MACD Line (a faster-moving average) closes below the Signal Line (a slower moving average), it typically reflects a bearish trend underway. Conversely, the trend switches to bullish when the MACD Line closes above the Signal Line.
The difference between the two moving averages makes a Histogram. If the faster-moving average moves away from the slower moving average, it indicates an MACD Divergence. Similarly, when the faster-moving average gets closer to the slower one, the crossover is called an MACD Convergence.
In 2020, Bitcoin prices reacted accurately to the MACD crossovers. The chart below illustrates the said correlation.
The recent bearish crossovers between the MACD Line and the Signal Line have led to declines. Similarly, bullish crossovers have led to massive spikes. The Histogram indicator showed the strength of both upside and downside moves based on the difference between MACD and Signal Lines.
Now, Histogram is recovering back to zero with the two lines looking at a potential MACD Convergence. The same fractal appeared last in March 2020. That followed a massive Bitcoin price rally from $3,858 to circa $65,000.
Preston Pysh, the founder of the Pylon Holding Company — an equity investment firm — expected the MACD fractal déjà vu. The analyst tweeted:
The weekly BTC MACD is looking spicy. pic.twitter.com/6TvdV13yNc
— Preston Pysh (@PrestonPysh) August 5, 2021
Additionally, in a note published in July, Katie Stockton, founder and managing partner of Fairlead Strategies, wrote that Bitcoin’s “intermediate-term momentum” was improving thanks to the MACD Histogram.
But spot markets have largely ignored long-term upside outlooks for Bitcoin as the asset struggles repeatedly to break above $40,000. Its previous attempts to extend its upside momentum beyond the said level have met extremely high selling pressure.
Meanwhile, on a brighter note, a similarly strong buying sentiment near $30,000 has capped Bitcoin prices from pursuing deeper downtrends. As a result, equally assertive bulls and bears have trapped Bitcoin in the $30,000–$40,000 price range.
Related: Bitcoin bulls overtake the $40K barrier ahead of Friday’s $625M options expiry
Pankaj Balani, CEO of Delta Exchange, expects a bullish breakout move in the Bitcoin market should it manage to hold above $40,000 for a week.
“On a conclusive breakout of the $40K level, BTC could challenge the $48K level,” the executive said.
“On the downside, traders will keenly monitor the $36K level. On breakdown below $36K, BTC can quickly move to $28K - $32K range.”
Bitcoin was trading at $40,723 at publishing time.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
