Bitcoin has been on a tear lately, running to its highest prices since its heyday rally in 2017. However, I don’t think the rally is over yet. The leading cryptocurrency may not be just getting started, but that doesn’t mean new highs are out of the question.
Can bitcoin breakout over its prior highs near $19,965?
That high is not a consensus, depending on which data sources one is using. Still, generally speaking this area marks the high. It was hit on Dec. 17, 2017. Bitcoin then plunged to $3,122 a year later.
What a volatile run bitcoin has seen. It had run more than 2,000% from December 2016 to December 2017, then fell more than 82% over the next year. Even though I have remained bullish on cryptocurrencies over the long term, this type of momentum-fueled blow-off top rally was bound to endure a big correction.
But now we’re back in rally mode and because bitcoin has had so much time to consolidate, the rally can still be maintained. Let’s look at the charts.
With bitcoin, we should never “assume” anything. But given the run it has been on and the fact that it’s up more than 14% so far this week, one would assume we’ll finish the week in positive territory.
If so, it will mark the cryptocurrency’s seventh straight week of gains. If we zoom out to a monthly perspective, bitcoin is working on its second straight month of gains — up 31.6% so far in November — and its fourth monthly gain in the last five months.
As you can see on the multi-year weekly chart above, the $12,000 to $12,500 area was rather significant.
However, before we could challenge that level, bitcoin needed to clear the $10,500 mark, which was resistance for most of 2020. Even before the novel coronavirus pandemic.
The cryptocurrency held the 200-week moving average in March — although with some struggle at first — before turning higher again. Once it broke through $10,500 in July, it then held this mark as support.
When an asset finally breaks through resistance, then holds that mark as support, it’s very bullish price action. Of course, the next level of resistance was the $12,000 to $12,500 area I just referenced. Now through that mark, there isn’t much standing in the way of $19,666.
Perhaps we get a retest of the $12,500 level, although that seems unlikely at this point. Maybe we get a consolidation and retest of the 10-week moving average. In any event, I see this name pushing up to $20,000 within the next few months. I could certainly see bulls wanting to achieve such a feat by year end.
Also note that the 161.8% extension is at $20,078.
The Fundamentals and Acceptance Are Improving
Just a few years ago, cryptocurrencies were viewed with skepticism by the public. They didn’t know if it was a scam or if it was real — digital currency? C’mon.
But it’s definitely got a foothold in the future and admittedly, the early days were tough. There were not a lot of exchanges that one could buy and sell bitcoin on. Those that did exist did not always have the best reputation, either. There would be hacks or bankruptcies, sometimes leaving investors out in the cold. No one with any influence wanted to really attach their name to it.
Just a few years later and it’s all much different though.
When the coronavirus selloff crushed markets, froze liquidity and halted the economy, the Fed had to step up. This was done by pumping large quantities of cash into the system. That of course should drive up inflation and inflation-sensitive assets.
While bitcoin wasn’t an instant winner, it was the one to keep an eye on. As Paul Tudor Jones called it, it’s the “fastest horse” in the group.
That helped bitcoin’s image, as has other companies and investors as they get involved. Retail investors can buy bitcoin via certain brokerages or popular platforms like Cash App. Others are coming to the table, too.
Between more positive recognition, more accessibility via brokers and well-known reputable apps, and strong technicals, bitcoin prices seem poised to go higher.
On the date of publication, Matt McCall held a position in bitcoin. He did not hold a position (either directly or indirectly) in any of the other securities mentioned.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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