Bitcoin price analysis for March 1-7: the coin could rise to $50,000 in the short term
Bitcoin may attempt a relief rally in the next few days, but the higher levels are likely to attract aggressive selling by the bears
Business intelligence firm MicroStrategy, one of the earliest institutional adopters of Bitcoin, bought 19,452 coins at an average price of about $52,765 per coin. The latest purchase takes the total haul of the company to 90,531 Bitcoin. However, unlike previous transactions, the current acquisition by MicroStrategy did not arrest the decline in Bitcoin. This shows that other large investors may be booking profits.
A report by Glassnode shows that Bitcoin whales – holding between 1,000 Bitcoin and 10,000 Bitcoin – and humpback whales – holding more than 10,000 Bitcoin – have aggressively booked profits in February. They have collectively sold over 140,000 Bitcoin, worth about $6.72bn.
Analysts at JPMorgan have advised their clients to allocate up to 1 per cent of their portfolio for buying cryptocurrencies “in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio,” according to Bloomberg. This shows that institutional investors remain bullish about Bitcoin’s prospects in the long term.
The current price seems to have tempted an early miner to book profits. Analysts noted that two Bitcoin wallets that had been dormant since 2010 have moved 100 Bitcoin to German peer-to-peer exchange Bitcoin.de. Interestingly, Bitcoin’s price was $0.08 when it was mined on June 10, 2010. That means the miner’s stash has ballooned in value by 622,500 times since then.
Has Bitcoin bottomed out or could it fall further? Let’s do the Bitcoin price trend analysis of the weekly chart to determine the important support and resistance levels.
Bitcoin price technical analysis: weekly chart
Bitcoin witnessed a sharp correction last week. The aggressive profit-booking in the largest cryptocurrency pulled the price down to $45,223.95, a 21.33 per cent decline by the end of the week.
The sharp fall has formed a negative divergence on the relative strength index (RSI), which is a sign of weakening momentum. Strong up-moves are usually followed by large declines as traders rush to the exit.
If bears can sink the price below $42,000, the BTC/USD pair could start a deeper correction to the 20-week EMA. Both moving averages are sloping up and the RSI is close to the overbought territory, which suggests the trend still favours the bulls.
If the pair rebounds off the 20-week EMA, it will show that traders are buying the dips and that could keep the uptrend intact. On the other hand, if the bears sink the price below the 20-week EMA, it will indicate a change in trend.
The Bitcoin price weekly analysis shows the start of a corrective phase. Let’s perform the BTC price analysis of the daily chart to spot the critical support levels where the correction may end.
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Bitcoin price technical analysis: daily chart
Aggressive profit-booking by the bulls has pulled the price below the 20-day EMA. The next critical support to watch on the downside is the 50-day SMA. This support has not been broken since October 9, hence the bulls will try to defend it.
If they succeed, the pair may rise above the 20-day EMA and reach the first overhead resistance at $52,087. A break above this resistance could push the price to the all-time high.
However, the 20-day EMA has flattened out and the RSI is near the midpoint, indicating that the bulls are losing their grip in the short term.
If the price turns down from the current levels and breaks below the 50-day SMA, panic may set in and that may result in a deeper correction to $32,000 and then to $28,800.
How to trade Bitcoin this week
Trying to catch a falling knife can be dangerous. Therefore, positional traders may wait for the price to form a bottom before attempting any long positions. However, short-term traders may try to stay on the long side if the price sustains above the 20-day EMA.
Contrary to this assumption, if the price slips and trades below the 50-day SMA, it could signal the start of a deeper correction, hence bottom fishing may be avoided.
Trade Bitcoin to US Dollar - BTC/USD chart
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FURTHER READING: Bitcoin explained simply: everything you need to know
FURTHER READING: Bitcoin vs Bitcoin Cash vs Bitcoin SV: the ultimate guide