Bitcoin price has not yet done a new high. It has just been consolidating in a small range just below the $20k line. Do I still think that the risk for a pullback is high? Yes, I do. Let’s see why.
(charts show in full size once you click them)
The past few weeks are a great example of why I think it is not wise to trade short term at all. Let others get chopped out of their profits and be patient. The first thing is always to define significant support and resistance levels. Big resistance is now the $20k level, and strong support is the $14k level.
To put it simply, as long as we are below the resistance level, the price can easily go towards the $14k support level.
RSI rose quickly to 85+ during the recent rise from $10k to $20k, and this is a sign of FOMO (fear of missing out) buying. Now RSI turned down once the price rise stopped just below the $20k level.
We have rallied from the $4k March bottom so that the price has multiplied by 5. Is big money going to buy in hopes for another x5 to $100k perhaps, or is it going to wait and see, let the price action to calm down a bit before buying? I think the latter is more likely.
The scene is also getting very bullish with all these bullish news on how institutional money will buy bitcoin like crazy. This is typical for a local top. If we get a correction now towards the support at $14k, I suspect news will get bearish; maybe bitcoin will die once again?
If we break the $20k level, we might see strong panic buying, so be careful and don’t risk too much. In the long run, you want to maximize the number of bitcoins you hold. In the long run, there is no telling how high bitcoin value will rise. Breaking $20k and staying there without coming back below right away would be bullish.
If we have a long consolidation without big pumps or dumps so that RSI gets closer to 50-60, then that is a bullish sign. It would mean that the market has calmed down enough without a retrace so that it could have lots of fuel to continue the bull market to higher levels.
The next big resistances above will probably be the $50k line and $100k line.