Bitcoin easing back after post-split rally

In the wake of the Bitcoin split, could we be due a pullback given the recent rally?

Bitcoin
Source: Bloomberg

Bitcoin has surged through the $3000 mark following the split at the beginning of the month, with ‘Bitcoin cash’ being created at a lower valuation. This left the price of Bitcoin to push onward, continuing its previous upward trend.

The hourly chart shows that the subsequent rally is coming under some pressure here, with a trendline break showing, at best, a slowing of the ascent. At worst, this could mean we are due a pullback, with the possibility of a gap fill move back down towards $3000. The $3329 level will be key in this, as a break below that level would mean we no longer create higher lows on an intraday basis. 

Ultimately, this market seems to act much like an index, in that it has an innate uptrend over the long term. It has been proven that sell-offs are greeted with buying pressure, and as such it makes sense to look for longs on retracements. The four-hour chart highlights the fact that we were trading within an ascending triangle before the split last week. The prior swing low came in at $2644, which is the level that needs breaking for the bullish view to come into doubt.

However, until then a pullback on this wider spectrum could bring a buying opportunity, with the $2930 region looking particularly interesting from a risk-to-reward perspective. Looking at the stochastic, there is clearly a slowing momentum, and should we see a break below the 80 mark, alongside a move below $3329, it would look like we are set for a retracement lower for Bitcoin. Until that happens, the uptrend remains in play.                               

Bitcoin trading

You don’t need to own cryptocurrencies to trade on them.
Find out more about trading on bitcoin with IG.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts