Have the cryptocurrencies bottomed out or will they fall again after a short pullback? That is the question troubling most of the market participants currently sitting on the fence.
A bottom can be confirmed only in hindsight but the analysts try to call it in advance, using various tools.
One such prediction is from the virtual currency focused hedge fund, Pantera Capital Management. Its CEO, Dan Morehead believes that Bitcoin’s low of $6,500 is probably the bottom. But, why should we take this prediction seriously?
Because, in December of last year, Morehead had forecast that Bitcoin might fall 50 percent, and that is exactly what happened. Also, he is not known to make too many predictions. Morehead expects Bitcoin to rally above $20,000 by the end of the year.
He is not alone in forecasting a recovery for the leading virtual currency. Fundstrat’s Tom Lee has called a target of $25,000 on Bitcoin for this year.
Business magnate Tim Draper has projected a target of $250,000 for Bitcoin by 2022. Brian Kelly, founder and CEO of BKCM LLC, an investment firm focused on digital currencies has seconded Draper’s forecast.
We had mentioned in our previous analysis that Bitcoin will face resistance at the 50-day simple moving average (SMA) and that is what happened. For the past two days, the virtual currency has been struggling to cross the 50-day SMA. Today, the price has turned down.
We expect the 20-day EMA to act as a strong support on any decline. Both moving averages have turned flat, which points to a range formation in the short term, instead of a trending move.
The support of the range is likely to be $6,757.26. The resistance of the range is still not final because if the bulls break above the 50-day SMA, the next move will carry the BTC/USD pair to $9,400 levels.
Our view will be invalidated if the lows of $6700 break. Under that condition, a retest of the February 06 lows of $6075.04 will be on the cards.
Traders can continue to hold their long positions with the stop loss at $6700.