Looking at a bird’s eye view of Bitcoin, we can start to build an idea of where we’re going next by identifying overhead resistance and underlying support. Looking to the right of the chart, the volume profile indicator shows us the volume of buying and selling historically seen at a price point. This volume gives us a hint as to what price levels are likely to be defended, by both bears and bulls alike.
Bitcoin is currently bouncing from the strong support seen in the low $4000s. The volume here has increased dramatically in the last two daily candles, but we are still far from the capitulation volume seen on the drop to $6,000 in February. This is a higher time frame clue that the sell off and downtrend still has further to go.
We can reasonably expect the low $4000s to continue to act as a strong support in the immediate, and it is quite possible we begin to develop a range between $4,000 and $6,000. $5850 and $5500 both appear as strong resistance levels to overcome. Not pictured in the bird’s eye view, but looking closely $5200 appears as a higher volume node where we can begin to expect resistance. Overall there is very little price action in the upper $4000s and a bounce / shortsqueeze could relatively easily work it’s way to the low $5000s.
If the low $4,000s are breached we look down to $3,000 and the the high $2000s as the next major support. It can’t be said that this will happen for sure, but it is certainly a possibility to consider.
If you want the short and sweet:
- Moderate chance Bitcoin ranges between $4,000 and $6,000 for a period. A break above $6,000 would prove to be very bullish. However given current price action, break through even $5,200 is optimistic.
- Moderate chance Bitcoin breaks below $4,000 and from there we target $3,000 and the upper $2,000s.
While this bearish news isn’t exactly encouraging, negative emotions associated with a downturn are a natural part of market cycles. A falling price in the short-term does not detract from Bitcoin’s value proposition, nor does it detract from Bitcoin’s future. While things may look quite dark before the end of this particular cycle, it will come to an end as a bull market begins anew.