Bitcoin remains red hot. While the cryptocurrency was flat on Friday, bulls have to be happy with the way it’s holding up.
For a volatile asset like bitcoin, the word “flat” isn’t often used to describe its price action. But that’s what we have on Friday after a 9.9% rally on Wednesday and another 6.8% gain on Thursday. The move sent bitcoin to an all-time high.
Some investors expected bitcoin prices to unwind a bit. That’s after it rallied as much as 11.3% on Thursday before its gains were cut down.
It looked like an exhausted rally as bitcoin had rallied for six straight sessions into Dec. 17. The start of that rally can be traced back to the Dec. 11 low near $17,570.
Bitcoin promptly rallied more than $6,200 to Thursday’s high, a gain of 35.3%.
Earlier this year, legendary trader Paul Tudor Jones called bitcoin the “fastest horse” as he was looking for investments to benefit due to money printing, low rates and other liquidity-boosting efforts made by the Federal Reserve and other central banks.
I guess he was right.
I don’t think Thursday’s rally marked an exhaustive point in bitcoin - at least, not long term.
On the weekly chart above, we have a simple layout that helps explain the various rallies and pauses.
Bitcoin has been in a strong uptrend since bottoming in March. Ultimately the 200-week moving average wavered as support, but held up well under duress.
From there, we had a breakout over $10,000 and then bitcoin held that level as support. For a bullish trader, that is an excellent development in price action.
Bitcoin then flew higher, up toward the prior all-time high just below $20,000. Naturally, bitcoin stalled near this level as it approached the prior highs. Further, the 161.8% extension from the March low to the preceding 2019 high was in play near $19,800.
Upon pushing through this area with great force, bitcoin tagged the two-times range extension at $23,528.
So what now?
I don’t know if we’ll get it but a pullback toward $20,000 would be an excellent development. It doesn't have to hit $20,000, but just a notable dip could be an opportunity.
Not only would it give buyers another chance to “load up the truck,” but it could show that prior resistance is now support like we saw with the $10,000 level. Plus, it would allow bitcoin to digest a bit after a big run in a short amount of time.
If the $20,000 area fails as support, it will put the 10-week moving average in play.
If bitcoin can take out the current high up at $23,630, then the 261.8% extension may be the next target up near $29,562.