Bitcoin shows strength again – retest of $58,000 now likely
Bitcoin opened in positive territory this week, attempting to reclaim its record high after crashing to its three-week lows in the previous session.
The benchmark cryptocurrency rose 4.70 percent before the London morning bell, hitting an intraday high of just under $47,500 after bouncing off its 200-4H simple moving average wave. The sharp pullback was part of a falling wedge pattern.
In retrospect, traders see falling wedges as bullish reversal patterns that form when an Crypto Trader asset slides lower while forming a sequence of lower highs and lower lows.
This ends up creating two converging trend lines. Traders recognise a bullish trend when the asset convincingly breaks through the wedge’s resistance, accompanied by higher volumes.
Bitcoin above $50,000
On Monday, Bitcoin recorded a similar resistance breakout, with its volumes stabilising on a four-chart next to it. The move higher signalled that the cryptocurrency could post extended gains in the coming sessions, with levels above $50,000 looking like ideal primary upside targets for bulls.
However, a convergence of the 50-4H simple moving average (the blue wave) and a horizontal resistance line near $52,170 should test bitcoin bulls (Bullish for BTC: miners accumulate) before attempting to recapture the primary ultimate wedge targets above $58,000. In the meantime, the $43,000-45,500 support area needs to hold the ground to prevent the bears from taking control or risk a decline in BTC/USD prices to below $40,000 or above $30,000.
Overall, the early moves to the upside this week show that the bears are losing focus in the short term – which should help Bitcoin maintain its rally to $50,000 at best.
The macro narrative
Bitcoin’s rally (Go to Plus500 Bitcoin buying guide) will be influenced by the US government bond rally on Friday and Monday. Meanwhile, things are looking good for BTC as US President Joe Biden’s $1.9 trillion stimulus bill makes its way through the House of Representatives.
The bill is now in the Senate, which is controlled equally by Democrats and Republicans, with the deciding vote going to Vice President Kamala Harris, a Democrat. This has significantly increased the likelihood that the bill will become law even if the entire Republican caucus votes against it.
Analysts at Ecoinometrics comment that the Federal Reserve holds about $1.5 trillion in its Treasury General Account.
Meanwhile, Treasury Secretary Janet Yellen has made it clear that her office plans to spend all of the money to stay on track with Biden’s expansionary plans, which in addition to the stimulus include $1.4 trillion worth of student loan forgiveness and spending another $3 trillion on infrastructure projects.
„All of this is on the table for 2021, and the total amount is $6.3 trillion that the US Treasury needs to find somewhere,“ Ecoinometrics said. „Even if the final figure comes in lower, it’s still several trillion, far more than what’s currently in the Treasury’s general account.“
„In this environment, I can only see the narrative for Bitcoin as a hedge against the risk of inflation increasing,“ the data analytics portal said.