Bitcoin Price Retrace Looms After Sharp Correction

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.

btc17may1.png(source: TradingView.com)

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.

btc17may2.png(source: TradingView.com)

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.

History Lesson

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.

btc17may3.png(source: TradingView.com)

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.

(The views and opinions expressed here do not reflect that of CryptoGlobe.com and do not constitute financial advice. Always do your own research.)

Bullish Bitcoin Investors Are Ignoring Institutional Bears

Neil Dennis

Bitcoin investors remained positive this week, despite data showing that bearish bets on the futures market had increased during the previous week.

Positioning data on CME Bitcoin futures showed that institutional managers held 14% more short positions in the seven days to Friday, June 21, than in the week before, according to the Commodity Futures Trading Commission (CFTC).

Futures trade allows investors to back an asset's losses as well as gains: short positioning means backing an asset to fall in price over a defined period.  The increase in the CFTC short position data on CME Bitcoin futures, therefore, would indicate growing bearishness by the larger institutional players.

Playing it by the Charts

They may have been playing it by the charts. The previous two tops occured in mid-May when the price of Bitcoin reached a high of $8,352 before falling back nearly $1,000, and then at the very end of May reaching $9,066 before falling back to $7,807.

Bitcoin's price performnace

The chart shows that in the week to June 21, when shorts on CME Bitcoin futures grew, Bitcoin pushed up above $10,000, in a chart pattern that might have led many to believe another pullback was imminent.

This drop, predicted by many institutional investors, never came, however, and private investors continued to back the Bitcoin rally. Indeed, the CFTC report showed that smaller investors continued to hold more long positions - backing the continued rally: investors with fewer than 25 Bitcoin futures contracts showed four times as many long positions than shorts.

Short Covering

This may help explain how the rally of the last couple of weeks gained momentum, as those on the institutional side joined the buying to cover their short positions.

Tanya Abrosimova, analyst for FXStreet, said:

Many experts believe that at this stage Bitcoin is driven by FOMO (fear of missing out), while the market repeats the situation of late 2017.

It is also likely that Facebook's announcement about the lauch of its Libra cryptocurrency caught the institutional shorts on the wrong side of the market. Since the Libra announcement on Tuesday, June 18, Bitcoin has gained more than 30%.

Abrosimova added:

Looking technically, Bitcoin has been growing strongly for eight days in succession, which is the longest period of uninterrupted growth since December 2017. As BTC/USD is trying to take out a new barrier at $12,500. Once it is out of the way, the next bullish target of $13,000 will quickly come into view.