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Cryptocurrencies are on the rise once again, with bitcoin pushing towards the $10,000 mark. Could this be the beginning of another surge higher for bitcoin prices?
Bitcoin has been surging higher recently, with BTC/USD gaining 45% over the space of three weeks. Coming off the back of a period that seemingly focused on claims that we were seeing the bubble finally burst, there is a feeling that markets are seeing a more optimistic tone return for cryptocurrencies. With a host of countries having reviewed what steps to take with respect to targeting the sector, we are now moving into a period that should have greater certainty from a policy standpoint.
One factor helping things along will be the passing of the deadline for the completion of US Federal income tax, which occurred on 17 April. We have seen a circa 16% gain since that date. With substantial tax payments due for such a blockbuster year, there is no doubt that the tax-selling seen in recent months will have played a significant role in dragging crypto prices lower over recent weeks. Given the substantial sell-off we have seen in crypto prices, it would make sense for many large crypto holders to declare their earnings at this current rate in order to shift assets into a more tax-efficient holding method. The gains we have seen since that tax day point towards a feeling that the shackles have been taken off somewhat.
Looking across the spectrum at some of the altcoin, we are seeing a sharp rise in some of the smaller cryptos as well, with ripple (XRP/USD +88%), bitcoin cash (BCC/USD +93%), ether (ETH/USD +34%) and stellar lumens (XLM/USD +34%) all gaining significant ground over the past week. This rise in altcoins highlights a significant shift in market confidence, which is something that has been missing for some time.
On the charts for bitcoin, there is a clear shift in the rate of decline, with the price breaking through trendline resistance, passing through the $91.71 swing high today. That points towards a possible shift in mentality for bitcoin, with the $11,796 level providing the next major resistance to be broken. A break above there would provide a much more confident bullish signal, bringing about a long-term bullish double bottom formation. For now, there remains a risk that we are seeing a retracement, and with the price having passed the 50% level, the two remaining levels to watch are the 61.8% ($9733) and 76.4% ($10,512).
Given the rally through $9171 resistance and the 50% retracement, there is reason to believe we will see further upside in the near term. However, with the price approaching the apex of a rising wedge formation, it is worthwhile noting that we could see a breakdown in the near term to provide a retracement in this ascent. A break and hourly close below $8760 would provide us with a bearish short-term picture in such an eventuality. However, should that occur, there is a good chance we would be seeing a retracement of the rally from $7826. Unless we see a break below that level, such a pullback would be seen as a buying opportunity rather than a sign of weakness.
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All trading involves risk and losses can exceed deposits. Trading CFDs may not be suitable for everyone so please ensure that you fully understand the risks involved. All trading involves risk and losses can exceed deposits.