Bitcoin prices have been struggling lately, dropping to a six-month low on January 24 and then failing to surpass $40,000.
The digital currency, the largest by market value, climbed to an intraday high of $39,262.10 this morning, according to CoinDesk data.
After rising to that level, the cryptocurrency fell back, declining below $38,500 and then rising toward $39,000, additional CoinDesk figures show.
At the time of this writing, the digital asset was trading close to $38,500.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Following these latest developments, several analysts offered some perspective on bitcoin, including what key variables are affecting its price and where the cryptocurrency might go next.
Financial Market Contagion
Josh Olszewicz, head of research at Valkyrie Investments, spoke to the situation, emphasizing the interconnectedness of markets.
“Bitcoin continues to correlate strongly with traditional market indices, specifically the S&P 500 and Nasdaq,” he said.
“Legacy markets will likely need to settle down and stabilize before BTC has a strong recovery off of 2021 range lows,” added Olszewicz.
Further, he mentioned the Cboe Volatility Index, or VIX, a measure of expected volatility in the S&P 500.
“The VIX also remains significantly elevated. Historically, spikes in the VIX have presented excellent longer term dip buying opportunities.”
The market observer is also leveraged the Relative Strength Index, a measure of whether an asset is overbought and oversold, which indicated that bitcoin prices may be headed for upside in the near future.
“Bitcoin did hit a multi-month RSI low over the past few weeks, last seen during the March 2020 selloff,” Olszewicz noted.
“Looking at RSI further, all lows in RSI to this degree since October 2018 have quickly mean-reverted to the 200-day EMA, currently at $48,000. Yearly pivot and VPVR resistance also show confluence for the $48,000 level.”
Several other experts provided technical analysis, with Nick Mancini, research analyst at crypto sentiment data provider Trade The Chain, offering some insight.
“Bitcoin seems to be trading in a ‘rising wedge’ formation, which typically ends bearish price action, but seems to be having an opposite effect – at least for now,” he stated.
“If Bitcoin can firmly break the key resistance level of $39,000, it has a lot of room to run until the $41,000 level,” said Mancini.
“From there, you would expect consolidation or possibly a reversal, which would likely test $39,000 as support before moving higher.”
Collin Plume, CEO and founder of My Digital Money, also weighed in.
“Bitcoin will go back to 40K and rest between $40k and $42k for a bit,” he said.
“I think it will bounce around that region for a while before it tries to break the $50K. After that, we can expect new ceilings.”
Analysts also spoke to crucial support levels that traders should monitor.
“If Bitcoin is unable to break $39,000, it is likely destined to range between $37,000 and $39,000 before another break attempt, or it may trickle down to key support levels of $33,000 and $29,500,” said Mancini.
Olszewicz also spoke to this matter.
“Any lower lows are likely to find support in the $26,000 to $30,000 zone based on the mid-2021 range low, a multi-year pitchfork, the two-year moving average, and yearly pivot confluence,” he stated.
“We also have a potentially still resolving head and shoulders chart pattern with a 1.618 fib extension to $25,000.”
William Noble, the chief technical analyst of research platform Token Metrics, also offered some perspective, pointing to the sentiment of market participants.
“Bitcoin is underpinned by lingering bearishness from the last down move,” he stated.
“In the near term, I think there could be a bullish surprise that catches people off guard.”
Noble cited Bob Farrell, a Merrill Lynch analyst, along with his famous words that when every expert is on the same page and believes something will happen, the exact opposite is usually what takes place.
“In this case, people expect stocks and BTC lower, and the something else could be a fast recovery from the next dip and then a big rally,” Noble stated.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.