Bitcoin pullback could provide buying opportunity for cryptos
The bitcoin pullback signals potential for further weakness, yet the crypto market is expected to turn higher again before long.
Bitcoin has been on an unbelievable surge over the course of 2019 thus far, with the crypto posterchild rising another 37% this month to take the year-to-date return to over 200%. However, that figure stood above 250% yesterday evening, with a huge surge towards $14,000 preceding a sharp decline overnight. This looks like a potential warning sign for the near term, with further downside possible. However, the wider picture does remain incredibly bullish for a market that many see as being on a one-way journey back towards record highs.
The daily bitcoin chart highlights a huge upper shadow on yesterday’s candle, which is accompanied by another failed rally earlier today. This is dragging the stochastic back below the 80 mark, which highlights the potential for further short-term downside. Although, as seen with the last time we saw such a breakdown in momentum, the losses were minimal and fleeting in nature.
The issue here is that we are seeing huge amounts buying pressure of late, with pullbacks being bought into heavily. We could see the bulls come in before long, as trendline support converges with the 76.4% Fibonacci retracement. That area of support points towards the importance of the $10,325 support level as a threshold, which must not be broken for this bullish outlook to remain. Thus, while we could see further downside over the short term, the $11,157 area of support looks like an attractive buying opportunity, as long as the price remains above $10,325.
Interestingly, many see this bitcoin surge as a precursor to a widespread rally in smaller coins. Certainly, the wider market has been enjoying substantial upside, yet for the most part it is bitcoin that leads the way; the oversized gains elsewhere can then occur once that confidence in the wider crypto market returns.
This week has seen IG introduce the Crypto 10 index, allowing traders to gain access to a single product, which provides exposure to the price of the top 10 cryptocurrencies weighted by market capitalisation.
The weekly chart highlights the base that has formed over the course of the first half of 2019. We are pulling back this week following sharp gains in recent days, yet there is a clear swing low around 3267, which has to be breached for a bearish picture to take hold over the medium term. Until then, this pullback is likely to be bought into once again.
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