BTC/USD exchange rate closes above the crucial $41,000 resistance
Bitcoin’s Wyckoff accumulation pattern confirmed as whales continue to buy
Next target resistance – $50,474
JAIPUR (Coinchapter.com) – Bitcoin finally printed a green candle above the crucial $41,000 resistance level in Saturday’s morning trading session. Explosive buying pressure in the previous session pushed the BTC/USD exchange rate upwards by 10%, from $38,290 to $42,400. The pair is currently exchanging hands at $41,550.
Bitcoin bulls and long-term holders say there’s more to come.
“$BTC just tapped 42k as resistance for the first time since the epic drop in May. Time to pay attention.”
said DJ-turned crypto trader and investor Scott Melker
“10 daily green candles in a row for #Bitcoin feels pretty good… but it has me wondering… What would 11 daily green candles in a row feel like?”
pondered quant-based crypto market analyst Benjamin Cowen
Wyckoff Accumulation Confirmed
With the latest move to $42,000, Bitcoin seems to have fulfilled the classic Wyckoff Accumulation pattern.
We did discuss the classic technical setup (for Bitcoin) propounded by Richard Wyckoff (in 1888) in one of our earlier articles. Didn’t spot it yet? Then it’s time for a rewind.
Mr. Wyckoff’s hypothesis considers two crucial aspects that define the market momentum of tradeable assets: accumulation and distribution. An asset in accumulation gives out bottoming signals after a steep price drop. A rebound to the upside follows soon after. During distribution, the price moves downhill after achieving a top.
Bitcoin effectively has followed the pattern twice in the last 2 months. In the first instance, buyers of the top cryptocurrency attempted a break above $41,400 (on June 15) almost a month after the May dump. But bearish market sentiment (read Chinese miner selloff) prevented the recovery from playing out.
The second instance of the Wyckoff accumulation pattern showed up in BTC/USD’s latest rebound move. For one and a half months, $41,400 remained a crucial resistance. Within the timeframe, Bitcoin retested the $30,000 psychological support multiple times and even slipped below the said price level on a few occasions.
Bearish sentiment was at its peak. Nevertheless, long-term investors (read whales and small fishes) milked the opportunity and lapped up available coins at drop-dead rates. Ecoinometrics, a Bitcoin on-chain insights providing newsletter service, confirms this.
In the issue dated July 28, the author Nick asserted that whales (holders in large quantities) accumulated significant Bitcoins during the recent bearish phase.
“…whales continue to accumulate pretty strongly. So if we interpret that in terms of market sentiment we could say that everyone seems confident that prices should go higher from there.”
And not just whales, Nick’s analysis suggests that small fishes (entities holding Bitcoin in relatively lesser quantities) also added to their stash. But here’s the catch.
Small fishes have been accumulating the top cryptocurrency more than whales. Nick deduces this from the “participation score.” It is “the sum of the weights of all the categories that have been accumulating on a 30 days basis.”
A high score is attributed to whale accumulation, and conversely, small fish accumulation gets a low score. As per Nick’s observations, the latter Bitcoin holding group’s been the dominant accumulator during the ongoing rebound.
The Ecoinometrics author warns that although the above scenario looks bullish but is inherently bearish since it means that “whales are about to offload their coins.”
Nonetheless, Bitcoin’s RSI (Relative Strength Indicator) has registered a strong uptrend since July 20. On the said day, the B-Word conference saw Cathie Wood, Jack Dorsey, and Elon Musk pass bullish sentiments about Bitcoin and cryptocurrencies in general. The same infused confidence back in BTC/USD, and bulls have not looked back since then.
BTC/USD Technical Setup
But, after tapping $42,366, Bitcoin is now on a breather. Bears have taken over, with the BTC/USD exchange rate still strong above the 20-day exponential moving average (EMA). The MACD (Moving Average Convergence Divergence) indicator just moved into the bullish zone, though.
Bitcoin is trading within the $41,000 and $42,000 range, near the 100% Fibonacci extension level. If buying enthusiasm remains firm, the BTC/USD exchange rate looks to target $50,474 next (coincides with the 161.8% Fibonacci extension level).
Flipping the said resistance into support would reinstate the previous bull market confidence back in long-term investors. The long-term upside price target remains at the 261.8% Fibonacci extension level ($63,594), with the overall scenario playing out favorably for futures traders looking to go long on BTC/USD.
However, the situation could get reversed if sellers take back control. A retraction back to 78.6% ($39,558) and 61.8% ($37,354) Fibonacci extension levels would become possible.
Himadri is an active investor in cryptocurrencies and upcoming blockchain technology projects. He has been a part of the digital asset space since 2017 and has held multiple positions as Social Media Manager, Assistant Editor, Sponsored Content Manager, Cryptocurrency Journalist roles in reputed news outlets like NewsBTC, Bitcoinist and CryptoPotato. He has also helped numerous blockchain projects gain prominence through terse and succinct marketing/technical content. Himadri comes with a marketing and engineering background, and has worked with reputed names such as GE Healthcare, Volvo Trucks and Polycom before moving into crypto.