Does this bitcoin rebound have longevity

Bitcoin has been rallying sharply over the past two weeks, gaining around 40% from the $6000 mark. However, with the creation of lower highs throughout 2018, there is a risk that we will see another turn lower in the near future.

Bitcoin
Source: Bloomberg

Bitcoin has been on the rise over the past fortnight, with the price pushing through trendline resistance to reach the 61.8% retracement. That rally through the trendline certainly signals a slowdown in the decline of the cryptocurrency, yet the question over whether this marks the bottom remains to be answered. The downtrend that has been in place throughout 2018 remains, despite this trendline break, yet it is clear that the rally through $7776 paved the way for a short-term period of upside.

The daily chart highlights that we have seen a substantial amount of support at $6000 throughout this year-to-date. Thus it was no major surprise that the price of bitcoin managed to reverse higher from that level, driving a 41% gain from the June lows.

Now that we have seen the price push into the 61.8% retracement, the trend of lower highs has a chance of coming back into play once more. There is a chance that we could see a deeper retracement into the 76.4% level ($8967), but there is also a chance that we will see the price continue upwards and through $9956. Such a break above that early-May swing high would spark a bullish wider view for bitcoin. Until then, the trend of lower highs and flatlining lows (descending triangle) remains in play, and therefore there is a possibility we could start seeing selling come back into play before long.

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.