This time last week, Bitcoin’s outlook was relatively bullish. The largest cryptocurrency rallied up to the $4,440 level of resistance, showing strength before crashing back down to below $4,000.
The move to the downside continued this week, with Bitcoin falling to as low as $3,620 on Wednesday evening before bouncing back up above $3,800.
While the price action isn’t as jaw-dropping as November’s breach of support and drop to new yearly lows, it is significant for a number of reasons.
Historical support is holding, for now
Firstly, this range isn’t new for Bitcoin. In September 2017, the price fluctuated between $4,400 and $3,000, with much of the support being established around $3,600. The eventual break out from this range saw an extended rally to $20,000. That’s not to say Bitcoin is headed back there this time around, but it does show that this level of support could potentially be used as a spring for future price action to the upside.
Bart is back
Secondly, the infamous ‘Bart’ pattern has returned. Even the most astute technical analysts may not be aware of the Bart pattern. That’s because the momentum ignition algorithm that causes the pattern is banned from traditional markets.
In the crypto markets, however, there are no set rules or regulations limiting the type of algorithms that trade on exchanges. The Bart pattern works by pumping the price, chopping sideways for a short period of time, then dumping the price back to the initial point of the pump. This is designed to entice traders to buy after the initial pump, only to lose out when it falls back down.
This week we have seen a number of ‘inverse Barts’, which has seen the price cascade to the downside before a period of sideways movement and a subsequent move back to the pivot point. This algorithm is often employed during periods of accumulation, as inverse Bart patterns were seen in both April and July this year around the $6,500 mark, before rallies to $10,000 and $8,400 respectively.
The bearish case
Following November’s sell-off, the overall trend of Bitcoin is almost certainly down. Bears currently have control due to a lack of confidence from buyers, many of whom predict that the $3,000 and $1,800 levels could still come into play.
After failing to gain a level over $4,400, Bitcoin has slumped to the downside, only being propped up by the $3,600 level of support. With buyer confidence seemingly at an all-time low, and many predicting a capitulation bottom before a reversal, more downside movement could be expected in the lead up to the New Year. This is in stark contrast to last year when Bitcoin rallied to an all-time high, with many altcoins following its lead.