Bitcoin (BTC) Reverse from a Critical Support Level, Monthly Gains at 19%

Bitcoin bulls seem to be readying for a comeback after last week’s dip. At spot rates, BTC has an upper hand against the greenback, adding 3% in the past trading day, subsequently pushing their monthly gains to 19%.

Notably, from the daily chart, there is a conspicuous bull candlestick bouncing from the 20-day Moving Average, or the middle Bollinger Band, an important support level, pointing to accumulation and possibly bull trend continuation.

Traders are Cautious

Whether this is bullish or not isn’t important. This is because the market is cautious, and traders willing to exit in case prices turn for the worst.

The most recurring theme among permabears is the possibility of prices tumbling down to $5,500 or worse in days ahead.

Their argument is that at spot rates, BTC price is overvalued and there is a high probability of price action striking equilibrium through a markdown from spot levels to below $7,000.

Bitcoin May remain range bound

Other analysts are of the view that BTC could consolidate in wide ranges in a “max pain scenario” until market participants lack interest. Then bulls will flow back and thrust prices higher.

According to Josh Rager:

“After the breakdown at $9200, many are pointing to $5ks again for BTC. IMO, looks like potential accumulation in this range between $7k and $9k. Max pain is sideways – just enough to disinterest and to keep retail investors from buying heavy in fear of lower prices.”

Adding that:

“Most aren’t willing to sell Bitcoin out of fear if price drops below $6k. But many would likely take the opportunity to buy more Bitcoin. In the previous range, every time Bitcoin dropped in the $6ks, it was bought up within a couple days to push price back over $7k.”

Prices Reverse from the 20-day Moving Average

As it is, BTC is in a firm uptrend and market participants are net bullish judging from price action of the last few days.

The failure of bears to comprehensively close below the middle Bollinger Band as trading volumes dropped is hinting of an exhaustion.

Besides, last week’s price action was held within Jan 14 trade range. From an effort versus results perspective, this is a net positive for bulls.

Moreover, today’s bull candlestick is also reversing from the 38.2% Fibonacci retracement level–an important reaction point, accompanied by decent trading volumes pointing to participation.