The last time such an instance occurred was back in April 2019, when the price of BTC rose 175 percent to create a yearly high of around $13,880 after a temporary pullback to $4,995, Bitstamp data shows.
Bitcoin may see a move higher in coming weeks, courtesy of two major daily moving averages heading for a collision dubbed a golden cross.
The cross occurs when a short-term moving average (MA) crosses above a longer-term one, typically the 50-day and 200-day MAs, hinting at strong upward momentum in an assets price.
Therefore, if history repeats, BTC could be in for a short-term drop before making its way to a new high for 2020.
The convergence of the two key MAs are an indication of strong buying pressure as BTC continues to post positive gains year to date. Bitcoin is up 43.5 percent since Jan. 1 and up 175 percent year on year from the Feb 14, 2019, close of $3,560.
However, the golden cross will need a sustained positive follow-through or the odds of a deeper pullback may rise.
Supporting the potential for short-term losses, the 14-day relative strength index (RSI) – an indicator used to judge the momentum of a given trend – is currently indicating near overbought conditions with a reading of 67.2. A value of 70 and above represents overbought, while 30 and below hints at an asset being oversold.
Additionally, yesterday’s bearish engulfing candle opened the doors for another test of $10,000. The temporary pullback could be extended if prices fall beneath the $10,000 psychological resistance, exposing $9,867, a region of former hourly resistances.
Overall, price action has been trending bullish, as demonstrated by a weekly price breakout on Jan. 20 from the almost seven-month descending channel, beginning late last July.
The 50-period MA on the weekly chart (yellow line) has been signaling bullish momentum when prices have remained above it, as seen in 2017 and the first quarter of 2018. Prices remained bearish below throughout the latter half of 2018 and all of 2019, indicating weaker buyer demand.
Prices remain firmly above the 50 MA, hinting at greater buying power ahead of the expected bullish «halving» event in May 2020, a supply cut programmed into bitcoin’s code that sees miners’ rewards reduced by 50 percent.
The mid-term bullish view would be compromised should prices drop below $9,706, the level of a major bullish engulfing candle on Feb. 11. That could upset the prospects for the incoming daily golden cross and a continued rally to new 2020 highs.