Bitcoin had a strong session on Friday, clearing the $42,000 level and finally putting to bed questions as to whether or not it can break out of this consolidation area. It is interesting that the narrative about Amazon accepting Bitcoin was what caused the initial surge higher, but since then it has been repudiated. Nonetheless, Bitcoin has continued to stay elevated, and the fact that we have bounced from the 50-day EMA suggests that we are ready to go higher.
The fact that we have made a “higher high” helps the idea of this market going higher, and I think we will probably start to look towards the $45,000 level above. Ultimately, as we have broken out of the $10,000 rectangle, it suggests that the market is probably going to go looking towards the $50,000 level. The $50,000 level is an area that is a large, round, psychologically significant figure and an area where we have seen a lot of reaction in the past due to that. It is because of this that I believe the market is more likely than not going to see that as a potential target.
To the downside, the 50-day EMA still offers quite a bit of support, and if we were to break down below there, I think that would be very ugly for the market, because we have seen such a surge higher. As things stand right now, perhaps people are trying to use Bitcoin as a bit of an inflation hedge, due to the fact that the interest rates were spiking a bit higher during the Friday session as well. Regardless, the technical set up has shown bullish pressure either way, so longer term I think that the market is going to continue to try to go to the upside, but Bitcoin will continue to be very volatile as the market could not quite form the so-called “death cross”, so it is likely that we would see an attempt to take off again. Over the longer term, I think the $50,000 level above will be crucial, and if we can clear that level, it is likely that we could go looking towards the $60,000 level.
