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BTC-USD Gearing up to Test Recent High at $1139.89

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The break of the $1000 handle points to further gains for bitcoin, with key resistances above $1100. The rising value of the cryptocurrency over the past year has been bolstered by sensible regulation from China’s central bank, demand from large emerging economies such as Nigeria and India, as well as an increased public awareness of bitcoin.

The Case for Bitcoin gets Stronger

While actions from the PBOC saw bitcoin drop from its recent high of $1139.89 to a low of around $750.00, confidence has returned to the market, with the cryptocurrency breaking the $1000 psychological barrier again. For the first time in Bitcoin’s existence, the market has closed for the week above the $1000 handle. The market seems to be taking the regulatory steps from the PBOC as a positive factor for bitcoin going forward, becoming more transparent and more credible.

The intense demand from emerging economies such as Nigeria and India is also providing bitcoin bulls with strength. With such strong demand in Africa’s largest economy, the price is trading at a substantial premium, above $15000 at the time of writing, or just over 500,000 Nigerian naira.

Altcoins have also benefitted from BTC-USD’s spectacular run, providing boutant conditions for the entire cryptocurrency market. In February 2016, when bitcoin was trading near $370, a market capitalization of $1 million would be enough to get into the top 48 cryptocurrencies. However, the rising value of bitcoin now has lifted the value of cryptocurrency in general, with a $1 million market cap only getting into the top 100 cryptocurrencies as of February 3, 2017.

This ‘tailcoat effect’ has mainly benefitted altcoins based on Bitcoin, such as Counterparty and Dash, as well as popular cryptocurrencies such as Ether, Monero and Ether Classic. With a greater public awareness of bitcoin, this is an important inroad leading investors to learn of other cryptocurrencies.

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The price of Bitcoin may also be lifted in anticipation of the introduction of a Bitcoin ETF, which would galvanize the publicity surrounding the cryptocurrency and allow traditional investors to gain access to this new asset class. A decision from the SEC is due on the Winklevoss ETF on March 11; in a matter of several weeks, a launch of the first bitcoin ETF would have an enormous impact on its price, with a run up to $2,000 a strong possibility.

The Technical Outlook

The chart below shows the weekly price action for BTC-USD. A bullish outlook is illustrated, as the previous week’s candlestick managed to close higher than the conversion line (blue), providing a strong buy signal. Also, notice that buyers remained in control the entire week beginning January 30 with some pullback from bears, retreating from the high at $1044.23. As shown below, last week’s candlestick is a variant of the Bullish Marubozu, pointing to further gains in the weeks ahead. We anticipate BTC-USD to tend towards the most recent fractal resistance at $1139.89. The conversion line offers support at $945.61 and buy limit orders are suggested around this level.

Also, notice that the lagging line (purple) is breaking above the previous peak at $997.75, suggesting more upside is to come. Therefore, we look for buying opportunities as long as BTC-USD remains above $997.75.

Looking at the entire time series of the price of bitcoin, we see that the lagging line now faces no resistance at higher levels, given that there are no peaks in the lagging line above $997.75. Therefore, bulls will be able to exert a greater influence on BTC-USD and push towards resistances at $1139.89 and the all-time high at $1163.00.

While the start of 2017 brought bitcoin along on a bumpy ride, looking at the monthly price action below, we see that BTC-USD will continue surging. Firstly, the chart below illustrates the change in the color of the Ichimoku cloud, from red to green, providing an indication that a long-term upward trend is in play.

Secondly, we see that the support level provided by the Bullish Marubozu at $742.06 has remained intact, providing impetus for further upside.

Thirdly, we see that the conversion line is trending higher and is above the base line (red), suggesting bullish momentum will dominate. However, on the monthly timeframe, the lagging line indicates resistance at $1119.80. A monthly close above $1119.80 for February will strengthen the bullish outlook for 2017. Therefore, traders should be cautious when bitcoin approaches the $1119.80 level, as well as further resistances at $1139.89 and $1163.00.