Bitcoin at critical support level which will dictate direction

With bitcoin trading at a critical level of historical support, we look set for a pivotal move which can provide a directional bias for the coming weeks.

Source: Bloomberg

The price of bitcoin is trading around a crucial long-term support level this week, with the decline in the cryptocurrency coming into question. The sharp ascent into $20,000 seems like a long time ago, and while everyone seemed to be looking for longs in bitcoin, we have been in this downturn long enough to consider trade in either direction. With the price currently at such an important crossroads, we are expecting to see this market either bottom out, or continue this recent decline, with the $3000 mark widely discussed as a potential market bottom.

The weekly chart highlights the existence of a 76.4% Fibonacci support level, which perfectly matched the low set back in early February. With lower highs being set since the peak in late 2017, we have been exhibiting a descending triangle formation. The breakout from that pattern would come with a rally through $9957, or a significant breach of the $6000 mark. As such, we should expect that whatever happens in the coming days should set us up for the coming weeks of price action.

This brings us to the shorter-term picture, with the reaction to that $6000 area setting us up for future short-term price movements. The daily chart shows that we have a descending trendline to contend with, currently around $8500. For a shorter-term bullish picture to come into play, we would need to see a break through $6835.

On the hourly chart, we have seen a very interesting reaction to this support zone, with the biggest hourly candle in over two months being posted over the weekend. This does not necessarily mean that we will rebound from here, but it does show the relevance of this support zone as a means of driving future price action. The break above $6252 could be an initial signal of impending upside, yet the $6835 level is going to be the more important level in signaling further upside. A break back below the $5769 low posted on Sunday would provide a signal that we are set to trend lower for longer yet. 

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