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- Bitcoin hit seven-week highs during the Asian trading hours and could extend the rally to a key Fibonacci hurdle above $8,600.
- A weekly close (Sunday, UTC) above $7,960 looks likely and would confirm a falling channel breakout on the weekly chart and signal a revival of the bull run from lows near $4,100 seen in April 2019.
- Gold witnessed a channel breakout at the end of December and has rallied by more than $100 ever since.
- Acceptance below $8,000 would weaken the odds of channel breakout this week.
Bitcoin jumped to seven-week highs early on Wednesday and appears on track to confirm a significant price breakout similar to that seen by gold.
According to CoinDesk’s Bitcoin Price Index, the number one cryptocurrency by market value rose to $8,463 – the highest level since Nov. 18 – during the Asian trading hours as Iran launched retaliatory attacks on the American bases in Iraq.
While bitcoin rallied to multi-week highs, gold, a classic haven asset, jumped above $1,600 for the first time since 2013. Other anti-risk assets like Japanese yen, Swiss franc and U.S. bonds also drew bids.
The safe-haven narrative surrounding bitcoin has strengthened with the cryptocurrency gaining ground in tandem with gold since Friday.
The yellow metal found takers near $1,530 on Friday after the U.S. killed a top Iranian military commander and rose to a high of $1,611 earlier today. Meanwhile, bitcoin turned higher from lows near $6,850 on Friday and has gained more than 20 percent since.
The cryptocurrency now looks set to take a page out of gold’s book and confirm a falling channel breakout on the weekly chart.
Bitcoin and gold weekly charts
As can be seen, both assets had a tough time in the second half of 2019.
Gold (above right) topped out at $1,557 at the end of August and fell to lows below $1,450 in November, creating a falling channel on the weekly chart. The channel was breached on the higher side in the last week of December with a convincing move above $1,483. The breakout signaled a resumption of the rally from lows near $1,270 seen in April and since then, the yellow metal has rallied by more than 8 percent.
Bitcoin’s weekly chart (above left) also shows a falling channel, which represents the sell-off from the June 2019 high of $13,880 to the low of $6,425 reached in December.
The cryptocurrency is currently trading above the falling channel resistance of $7,960. A breakout would be confirmed if prices close the week (Sunday, UTC) above $7,960. That would imply a continuation of the rally from April 2019 low of $4,100 and open the doors for a re-test of $13,880.
A breakout looks likely with bullish developments on key technical indicators.
Weekly and daily chart
Bitcoin’s rise to seven-week highs has confirmed seller exhaustion signaled by multiple long-tailed weekly candles and the bullish divergence of the MACD histogram, an indicator used to gauge trend strength and identify trend changes.
A bullish divergence occurs when an indicator produces higher lows, contradicting lower lows on price and is considered an advance warning of an impending bullish reversal. The MACD has charted higher lows since early December.
Meanwhile, the daily chart is reporting an inverse head-and-shoulders breakout, also a bullish reversal pattern. The recent rally looks to have legs, as buying volumes (not shown) have risen over the last few days and the MACD is charting higher bars above the zero line, signaling a strengthening of bullish momentum.
All-in-all, the odds appear stacked in favor of a rise to $8,626 –
the 61.8 percent Fibonacci retracement of the sell-off from $10,350 to
$6,425.
The odds of bitcoin confirming a channel breakout this coming
Sunday would drop if prices find acceptance below $8,000 with high
volumes.
That said, stronger buying pressure could emerge in the subsequent weeks, yielding a breakout, as miner reward halving (supply-cutting event) is due in May.
At press time, bitcoin is changing hands at $8,340, representing a 5.4 percent gain on a 24-hour basis.
Disclosure: The author does not currently hold any digital assets.