Bitcoin – Holding on to Tuesday’s gains

It was like the good old days in the crypto market on Tuesday, as traders in Europe and the US woke up to a more than 20% rally in bitcoin. Safe to say, it had become the forgotten instrument for a while as the very volatility it was known for slipped away and price consolidated around $4,000.

Bitcoin Daily Chart

Source – Thomson Reuters Eikon

In the absence of any real catalyst though, many are left to question whether there’s anything of substance behind the bounce or if it’s just a short squeeze. Bitcoin has found some resistance around $5,100 – previous support – but the real test will come around $6,000 which was a significant support zone throughout 2018, a break of which in November sparked the move back to almost $3,000.

Naturally people are looking for reasons for the rally on Tuesday, something that will support and sustain the breakout but as yet, it would appear there’s not much there. There have been various attempts to explain it and the most plausible may be a large order at a time when we’ve seen a prolonged squeeze and price was near long-term resistance.

Source – Bloomberg

The short-squeeze that followed likely exacerbated that move, resulting in a daily gain of more than 16%, the greatest since December 2017.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.