Bitcoin keeps on surging higher with no signs of a slowdown. We can see that it is currently holding strong above $8.6k and even if it declines near term, we could still see it rally higher to test the previous yearly high again or rise even higher to test the $9k level. However, we can also see that it is now very close to beginning the next major downtrend. The weekly close will be very important in this case. If we see a close above the 61.8% fib level around $8,681, we can expect further upside to test the 200-day moving average. If it closes below that level, then we will expect the downtrend in BTC/USD before the Chinese New Year.
So far, it appears more likely that the price will retrace somewhat before the Chinese New Year but we will most likely see the next definitive move begin after that. Most of the time throughout the trading history of Bitcoin (BTC), we have seen the Chinese New Year play an important role in the direction Bitcoin takes. So, at this point, all we need to do is wait and see how the price reacts to the trend line support it is currently trading above. I do believe that this trend line support will be broken this year but before it does, we could see another bull trap before the next halving to trap in as many bulls as possible. If we are in the second half of the previous cycle such that we have just finished forming a parabolic peak lower than the previous peak, it would mean that BTC/USD could enter a multi-year bear market.
It is very important at this point to be overly cautious about what could happen next. There is absolutely no reason to be bullish on the market at this point but there is no reason to be overly bearish either until we have a break below the trend line support. We need to look at this from a market maker’s perspective. Their objective now is to trap in as many bulls as possible and to pull that off they are going to have to give them a good reason to be bullish and stay bullish just before the next big crash. At the moment, WTI Crude Oil (USOIL) has found support atop the 200-day moving average. The EUR/USD forex pair has yet to take a definitive direction and Bitcoin dominance (BTC.D) is struggling to break past the 5-day exponential moving average. All of these developments indicate that we are very close to the beginning of the next decisive move and it is expected to happen around the Chinese New Year.
Author: Jefe Caan