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Bitcoin Soars Above $6000, Resistance Expected Near $7000

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Bitcoin Soars Above $6000, Resistance Expected Near $7000

Bitcoin has broken to yet another all-time high on October 20, breaching above the $6000 handle. We have obtained the bullish saucer signal on the weekly timeframe that we anticipated on October 13, triggering bullish momentum which is likely to take the market to a new ceiling near $7000. The market capitalization has also reached a significant milestone, with Bitcoin’s network value exceeding $100 billion for the first time.

Volumes traded have indicated strong interest in bitcoin over the past few days. The dip to the low-$5000’s precipitated this interest, as shown below.

We can see that volumes picked up as traders went into markets to ‘buy the dip’ on October 18, while volume intensified even further on October 20 to push BTC-USD past the previous all-time high at $5846.43 and above $6000. Looking at coinmarketcap.com, we see that over the past 24 hours, the volume for bitcoin markets has exceeded $2.8 billion, while money flows to altcoin markets dry up.

Bitcoin’s price is linked to the number of unique transactions done on the network. As more users get on board and the bitcoin network is utilized for more transactions, the value or utility that people receive from bitcoin increases. While price is at an all-time high, the number of transactions is just below its peak in 2017. Below, we see that the seven-day moving average of the number of confirmed transactions per day is above 300,000 and reaching for the peak from May 25, with 328,000 confirmed transactions.

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The ‘network effect’ is the main driver of the bitcoin price, according to Fundstrat’s co-founder Tom Lee, who has expressed a price target of $25,000 by 2022 amidst the recent surge in price. The target is based on the assumption that bitcoin will capture five percent of gold’s market share. Lee stated in an interview with, “the 5 percent number, really reflects the assumption that investors will allocate in their blended portfolio only 5 percent to alternative currencies. Today, that allocation is much greater, it’s closer to 10 or 15 percent in some portfolios. So, but at a 5 percent allocation that would value bitcoin at $25,000.”

The weekly price action is shown below, with BTC-USD currently trading just above $6100. With the bullish saucer signal confirmed on October 20, with a break above $5846.43, we anticipate the bullish momentum to bring the cryptocurrency to the Fibonacci extension level at $6926.54. Also, notice that this week’s candlestick looks to form a ‘hanging man.’ A break below the body of this candlestick, i.e., below $5683.92, next week will point to a short-term downward move, whereas a break above the high at $6145.42 will give stronger confirmation of a drift toward $7000.

Looking at the daily timeframe, we may see another leg up toward $7000, as the Awesome Oscillator is gearing up for another bullish saucer signal. For instance, the chart below shows that after three consecutive red bars on the Awesome Oscillator, the indicator has turned green in color and is now moving higher in value.

Therefore, the high for October 21 should be a key level to watch going forward. Currently, the high for October 21 is at $6145.42. Once the daily candlestick has formed, we look to enter into another long position once the market breaches above $6145.42. In this case, the bullish saucer signal will be confirmed and we should see BTC-USD attempt the $6900-$700 region.

As shown below, when applying the Fibonacci tool to the most recent fractal levels on the daily timeframe, the extension target lines up more or less with the extension target obtained with the weekly timeframe. Therefore, we could see some stiff resistance encountered in the $6902.26 to $6926.54 zone.

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