Does this bitcoin rebound have longevity

Bitcoin has been rallying sharply over the past two weeks, gaining around 40% from the $6000 mark. However, with the creation of lower highs throughout 2018, there is a risk that we will see another turn lower in the near future.

IG Analyst

Publication date : 2018-07-25T16:06:34+0100

Bitcoin

Source: Bloomberg

Bitcoin has been on the rise over the past fortnight, with the price pushing through trendline resistance to reach the 61.8% retracement. That rally through the trendline certainly signals a slowdown in the decline of the cryptocurrency, yet the question over whether this marks the bottom remains to be answered. The downtrend that has been in place throughout 2018 remains, despite this trendline break, yet it is clear that the rally through $7776 paved the way for a short-term period of upside.

The daily chart highlights that we have seen a substantial amount of support at $6000 throughout this year-to-date. Thus it was no major surprise that the price of bitcoin managed to reverse higher from that level, driving a 41% gain from the June lows.

Bitcoin chart

Bitcoin chart

Bitcoin chart

Now that we have seen the price push into the 61.8% retracement, the trend of lower highs has a chance of coming back into play once more. There is a chance that we could see a deeper retracement into the 76.4% level ($8967), but there is also a chance that we will see the price continue upwards and through $9956. Such a break above that early-May swing high would spark a bullish wider view for bitcoin. Until then, the trend of lower highs and flatlining lows (descending triangle) remains in play, and therefore there is a possibility we could start seeing selling come back into play before long.

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