Bitcoin (BTC) is all set to end August with double digit-losses, but a closer look at the price action suggest better times lie ahead for the leading cryptocurrency.
At time of writing, BTC is trading at $6,940 – down 10.7 percent from the month’s opening price of $7,727, according to CoinDesk’s Bitcoin Price Index. However, losses would have been much bigger had prices not recovered from the six-week lows below $5,900 seen on Aug. 14.
Indeed, the Bitcoin market has witnessed a solid two-way business this month.
Sellers dominated the first half as the markets reacted to the US Securities and Exchange Commission’s (SEC) disapproval of a Winklevoss Bitcoin exchange-traded fund (ETF) in late July. However, by mid-August, the bears had run out of steam and the technical charts were calling for a corrective rally. Accordingly, BTC picked up a bid and moved above $6,400 in the third week.
Notably, the short-term bullish reversal signals gained more credence after the cryptocurrency shrugged off the SEC’s rejection of nine other ETF proposals on Aug. 22.
Further, BTC/USD short positions in the futures market hit record lows, signaling the sell-off from the record high of $20,000 set in December likely ended around the psychological support of $6,000.
Consequently, the emboldened bulls pushed BTC to highs above $7,000 earlier this week.
So, while BTC is reporting a 10 percent monthly loss overall, the technical charts indicate there is a reason to be optimistic going forward.
As seen in the above chart (prices as per Bitfinex), a long wick (tail) is attached to the current monthly candle, which is widely considered a sign of trend weakness – that is, the bears failed in their attempt to push prices back to the June low of $5,755 and the bulls regained some lost ground.
Further, the bears have failed three times in the last 10 weeks to keep the cryptocurrency below the support at $6,000.
So, it seems safe to say the cryptocurrency has likely charted a long-term bottom around $6,000 and hence prices could revisit July highs above $8,500 in the next month or two.
Bitcoin’s long-tailed monthly candle indicates the long-term bear market likely bottomed out around $6,000.
A break above the July high of $8,507 would confirm a bullish reversal.
A monthly close below $6,000 (major support) would signal a revival of the sell-off from the December high of $20,000.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Beads image via Shutterstock; Charts by Trading View