Bitcoin (BTC) passes the $40,000 mark and then relapses

IN BRIEF

  • Bitcoin benefits from a minor support at $36,800 and another, more consequent, close to $34,100.
  • The daily data is bullish but the shorter time scales show signs of weakness.
  • The BTC could be in a final extended sub-wave, unless it has already reached its peak.

The price of Bitcoin reached another historical high on January 7, but fell sharply immediately thereafter.

While it is possible that Bitcoin has reached the peak of its movement, its correction cannot be confirmed until it has fallen below $34,175.

Another record high for Bitcoin

Bitcoin continued its ascent on January 7, reaching a new high of $40,365. However, it suffered a sharp drop almost immediately afterwards, dropping to a low of $36,616 the next day. The BTC has since recovered some of its losses.

Despite this fall, the technical indicators do not yet show any significant weakness, with the exception of the declining stochastic oscillator (shown in red below).

A possible weakness

The six-hour time scale shows the first signs of weakness in the form of a downward divergence in the RSI. That said, the MACD has not yet lost strength.

In addition, the BTC is following an upward support line, which is currently close to $34,000. Thus, even a fall towards it would not break the current bullish structure.

The two-hour chart shows contradictory signs.

The BTC has rebounded to the $36,800 minor support zone, creating several long lower strands. In addition, it has generated hidden bullish divergences.

That said, the MACD lost strength, which is a sign of weakness within the trend.

The hidden divergences, however, were a strong sign of continuation of the trend throughout the upward movement. There is not enough data to predict a bearish reversal, so we can assume that the BTC will continue its upward movement until it passes below the $36,800 support.

BTC Wave Count

In Bitcoin’s English-language analysis of January 7, it was said :

A plausible target for the top of sub-wave 5 is between $39,130 and $39,170.

The BTC reached this target without the same day, surpassing it shortly before its considerable fall. Thus, unless Wave 5 extends, the BTC has already reached its ceiling.

The count of minor sub-wave of the movement is shown in black.

The January 7 fall caused a break in trend line 2-4. This is often a sign that the upward movement has ended.

However, in order to confirm this, the minor sub-wave 5 must retrace entirely in less time than it took to form. Thus, to confirm the correction, the CTS must be under $34,175 (red line) by midnight of January 8.

If the BTC does not fall but continues to increase, it would mean that sub-wave 5 (orange line) has expanded. The next most plausible target for a peak would then be $46,639.

Conclusion

While it is possible that the Bitcoin movement has peaked, its correction is not confirmed until it has dropped below $34,175.