Bitcoin saw quite the bout of volatility on Wednesday. Early in the morning, the cryptocurrency tanked, falling as low as $6,450 in a strong move lower, before rebounding to the upside.
By the end of the day on Wednesday, the price of BTC had rallied as high as $7,300, surging by over 10% from its local bottom in the $6,400s on the back of seeming short covers and long-term investors buying the crypto dip.
While this reversal is evidently bullish, with some claiming that the macro bottom of the cryptocurrency market is now in with this move, some assert that it is only a matter of time before Bitcoin revisits the $6,000s due to a confluence of technical factors that suggests that BTC is not yet out of the woods, so to speak.
Despite the strength of the reversal candle, some suggest it may be time for the reversal to, well, reverse itself.
Prominent cryptocurrency trader CryptoHamster remarked Thursday morning that while the pump was “cool,” the four-hour BTC charts show clear signs that a pullback is likely. The Relative Strength Index, Stochastic RSI, and Moving Average Convergence Divergence (MACD) on the four-hour chart have all entered overbought territory, implying a pullback, likely to reenter the $6,000s will take place.
Structurally, this makes sense. Crypto analyst Mac noted in the wake of this spike upwards that the Money Flow Index has started to taper off as BTC failed to surmount a key horizontal resistance at $7,400, BitMEX contract funding has reset in favor of bears, and the Open Interest indicator has hit a local bottom, implying that shorts may soon start rebuilding positions.
Despite these somewhat bearish short-term factors, there are a few signs that a long-term bull case is forming once again.
In this latest move, Bitcoin held the key $6,500 level. $6,500 is around the bottom of a logarithmic growth channel that BTC has maintained for eight years.
Peter Brandt, a prominent commodities trader that has delved into the cryptocurrency space, drew attention to this trendline on Wednesday, noting that Bitcoin actually held the important support. This is pertinent as BTC decisively bouncing off this support is an action that preceded previous bull markets.