Bitcoin BTC/USD, which lost the $40,000 level on Sunday, was trading slightly below the level at $38,832.60 Monday at publication.
Traders and investors of the cryptocurrency may have been spooked by updated language in the bipartisan infrastructure bill, currently under debate in the U.S. Senate, that would have effectively defined participants in the cryptocurrency sector as brokers who would then have to provide information to the IRS.
On Monday morning, those fears were partly alleviated when last-minute cryptocurrency lobbyists succeeded in forcing lawmakers to clarify the definition of a broker.
For technical traders, Bitcoin’s retracement under the $40,000 level was much-needed consolidation after the crypto shot up 43% between July 21 and 31.
The Bitcoin Chart: Bitcoin’s 10-day rise, after putting in a bullish double bottom near the $29,300 level, has created the pole of a bull flag pattern. Saturday, Sunday and Monday consolidations have created the flag in the pattern.
If the bull flag is recognized, the measured move of a break from the pattern could see Bitcoin shoot up another 43% from the lowest area of the flag pattern. If this were to happen Bitcoin could soar up to about $55,700.
Although the $40,000 is a key psychological level, on Monday Bitcoin was holding above a technical support level at $39,489 which is a good sign for the bulls. Bitcoin was also in the midst of printing a doji candlestick pattern, which indicates a reversal to the upside may be in the cards.
Bitcoin is trading above the eight-day and 21-day exponential moving averages (EMAs) with the eight-day trending above the 21-day, both of which are bullish indicators. Bitcoin is trading below the 200-day simple moving average (SMA), which indicates overall sentiment in the crypto is currently bearish. If Bitcoin breaks up from the bull flag in any significant way it can easily regain the SMA as support due to its close proximity.
On Friday, when Bitcoin topped out and began a reversal to the downside the relative strength index (RSI) registered at about 75%, indicating overbought conditions. Consolidation was needed to drop the RSI back under 70%.
Bulls want to see big bullish volume come in and break Bitcoin up from the daily bull flag pattern and for the crypto to shoot up over resistance near the $44,850 level. If it can regain the level of support, it has room to reach $51,191 before reaching another level of resistance.
Bears want to see continued selling pressure drive Bitcoin down to negate the bull flag pattern. If Bitcoin loses support at $39,489 it could retest the $33,400 level before potentially bouncing.
(Photo by Eivind Pedersen from Pixabay.)
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
