Chart of the day: Will the Bitcoin rally continue?
The tightening of sanctions imposed by the United States and its Western allies against Russia in connection with the events in Ukraine is believed to contribute to an increase in demand for bitcoin. And this is not only due to the fact that transactions in cryptocurrency do not need the SWIFT system, which is usually used to conduct financial transactions in the international banking system. Russia recently announced that it may allow the use of bitcoin as a means of payment for oil and gas exports.
Apparently, it is for this reason that the leading cryptocurrency turned up over the weekend, having been in a narrow range for some time before.
However, changes in the dynamics of supply and demand are also impossible to ignore. Although the price has increased slightly, volumes seem to be decreasing.
To be honest, the very concept of bitcoin seems dubious to us. However, our continued skepticism about its true value, of course, does not mean that bitcoin will not grow.
On the other hand, we take a “bearish” position also based on the dynamics of supply and demand in the long term. And yet we will not deny that a trend is developing against the basic direction of the market.
BTC/USD – daily timeframe BTC/USD – daily timeframe
Either an ascending triangle or an inverted head and shoulders (H&S) pattern has formed on the bitcoin chart. This is a standard situation, since both patterns can generate a powerful impulse at a breakdown, which will provoke a technical chain reaction.
However, the question arises: will the current purchases during the rollback be enough to refute the previous, much more significant “head and shoulders” reversal pattern? It is unlikely, however, that we do not know the future.
And yet, we believe that the decrease in volume during the formation of the bottom and the completion of the figure does not support the upward movement of the price. On the other hand, the probability of forming a base increases.
Aggressive traders are likely to perceive what is happening as a corrective rally and will “short” the cryptocurrency.
Conservative traders should wait for evidence that the “neck line” of the large “head and shoulders” figure will not be broken and the price will again fall below the “neck line” of the inverted H&S.
Moderate traders can open a short position if the “neck line” of a large H&S shows resistance, and a top is formed on it, or a long position when the price rebounds from the “neck line” of an inverted H&S.
Aggressive traders can open a short position if there is resistance, or if the price returns to the “neck line” of a large H&S figure.