Bitcoin Makes Biggest Weekly Price Gain Since October

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  • Bitcoin jumped more than 11 percent last week, confirming a falling channel breakout (bullish reversal) on the weekly chart.
  • The breakout has opened the doors for a re-test of October highs above $10,000.
  • For the next 24 hours, the focus is on $8,200, a level that has proved a tough nut to crack in the last few days. A strong rejection above $8,200 could yield a temporary drop to sub-$8,000 levels.

Bitcoin
logged double-digit price gains last week, confirming a reversal from a
six-month downtrend.  

The top cryptocurrency by market cap gained 11.2 percent in the seven days to Jan. 12, the biggest weekly gain since October, according to CoinDesk’s Bitcoin Price Index.

Prices rallied by 16 percent in the third week of October. Since then, bitcoin has managed to score gains in just three weeks.

During the bleak six months to Dec. 31, the cryptocurrency eked out double-digit weekly gains just two times. Further, bitcoin suffered losses in 15 out of 27 weeks, with two weeks ending roughly flat.

Clearly, the bears were in control in the second half of 2019. Prices fell from highs above $13,000 to $6,425 during the period, establishing a series of lower highs and lower lows on the weekly chart.

That
downward trajectory, however, has ended with last week’s 11 percent gain and
the path of least resistance is now on the higher side.

Weekly chart

Last week’s candle closed well above the upper edge of the bearish channel, confirming a bullish breakout.

The pattern
indicates the pullback from $13,800 has ended and the bull run from lows near $4,100
seen in the first week of April 2019 has resumed.

The 11 percent
rise has also confirmed the bearish-to-bullish trend change signaled by the hammer
candle created in the third week of December.

The
activation of twin bullish cues is backed by a rise in buying volumes to the
highest since November. Notably, last week’s volume bar violated the descending
trendline, validating the price breakout.

The cryptocurrency has also moved back above the bullish ascending 50-week moving average.

The odds appear stacked in favor of a rise to $10,350 (October high). A weekly close (Sunday, UTC) below $7,342 would invalidate breakout, although that looks unlikely currently.

At press time, bitcoin is changing hands at $8,110.

Pre-halving breakout

With the breakout, the odds of bitcoin repeating history by crossing the 2019 high of $13,880 ahead of the May 2020 mining reward halving have strengthened.

Programmed into the blockchain, the halving cuts the amount of bitcoin created every 10 minutes by half. The process is repeated every four years.

Historically, bitcoin has hit a new market cycle top (the highest point from the preceding bear market low) in the calendar year of a halving, but before the event, according to popular analyst Rekt Capital.  

For instance, bitcoin bottomed out near $150 in January 2015 and rose to a high of $502 in November 2015, confirming a bullish reversal. Prices then fell back to $365 in February 2016 before hitting a new cycle top $778 in June – a month ahead of the reward halving, which took place in July 2016.

Note that the high of $778 reached in June 2016 was the highest price from the bear market low of $150, but was well short of the record high (at the time) of $1,153 reached in December 2013.

Similar price action was seen in the 12 months to November 2012, when bitcoin underwent its first reward halving, as noted by Rekt Capital.

So, if history
is a guide, bitcoin could clock highs in the range of $13,880 (2019 high) to
$20,000 (record high) before the third halving, due in four months.

As for
the next 24 hours, $8,200 is the level to beat for the bulls.

Daily chart

A convincing break above $8,200 has remained elusive since Jan. 7. Prices printed a high of $8,463 on Jan. 8 but closed below $8,200. The bulls also failed to secure a daily close above $8,200 on Jan. 11.

With the breakout confirmed on the weekly chart, though, bitcoin looks set to scale $8,200 and challenge recent highs above $8,460.

Another stronger rejection at or above $8,200 could yield a pullback to $7,667 (Jan. 11 low).

Disclosure: The author does not currently hold any digital assets.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Source: Coindesk

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