Bitcoin’s (BTC) astonishing uptrend hit a bump in the road yesterday, finally giving back some of its May gains. The leading crypto dumped 20% in the span of just a couple of hours, from about $7,800 to about $6,200.
This movement has been very quickly bought back up, however, and Bitcoin is currently stabilized above $7,000. The speed with which the dip was rebought is encouraging, showing a bullish commitment to preserving the general uptrend.
After the shocking run to $8,400 at its highest point, a pullback and retrace, at least in the short term, was inevitable. The question now is, how low will the retrace go? The depth of the retrace will speak to Bitcoin’s medium term prospects: a deeper retrace will mean a more lengthy return to the uptrend and vice versa.
We should look for Bitcoin to hold $7,000. Doing so would be very encouraging; but this admittedly seems unlikely, simply because it was such a shocking run to begin with.
We can see on the chart above several possible support zones which could catch Bitcoin’s fall, all the way down to $5,200. And a Fibonacci retracement overlay from the bottom of the regional market structure, at $5,060, puts the critical 0.618 retracement level at about $6,330 - near where yesterday’s dump was bought up; within that Fibonacci structure, we are currently stabilized at the important 0.382 point.
It may be instructive for us look back at a similar event in Bitcoin’s history, to guess where a retracement might fall today.
During the 2015 bear market, Bitcoin had a shocking breakout (of over 100% in about eight weeks), which took it definitely out of that bear market. But of course, price did not go up in a straight line. There was a huge retracement and retest after this breakout.
The 2019 breakout, in what is probably our own definitive exit from the 2018 bear market, is very similar to 2015’s - more than 100% gain in about seven weeks.
In 2015, Bitcoin retraced to the 55 and 100 week exponential moving averages (EMA), then as now clustered together. These EMAs are currently sitting, and uptrending, at roughly $5,400. It would be completely reasonable to pin a guestimated retrace target around here.
But for now, we watch the $7,000 mark. This is the execution point for the retracement algorithm.
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