Bitcoin’s Path to $5K Faces a Major Hurdle
Bitcoin’s ongoing recovery rally faces a major obstacle that could impede progress towards $5,000, according to the technical charts.
The leading cryptocurrency by market capitalization jumped to a two-week high of $4,108 earlier today, validating the short-term bearish-to-bullish trend change confirmed earlier this week.
Notably, the break above the psychological hurdle of $4,000 looks sustainable, as 24-hour trading volume has jumped to one-month highs above $8 billion.
As a result, more bargain hunters could join the party, creating further upward pressure on prices. Even so, the rally may stall near $4,400 for some time, as the area around that psychological level is packed with key technical lines.
As of writing, BTC is trading at $4,040 on Bitstamp, representing an 8 percent gain on a 24-hour basis.
The above chart shows:
- The 50-day exponential moving average is located at $4,402.
- The bearish lower price high of Nov. 29 is seen at $4,410.
- $4,430 is the 38.2 percent Fibonacci retracement of the sell-off from the Nov. 7 high to Dec. 15 low.
The relative strength index (RSI) on the hourly and 4-hour charts is now reporting overbought conditions, too.
All this combined, BTC will likely have a tough time scaling the stiff resistance zone of $4,400-$4,430 in a single attempt.
Moreover, a consolidation or a minor pullback from the current level of $4,040 will allow the RSI on the hourly and 4-hour chart to roll over from the overbought territory and realign in favor of the bulls. That, if confirmed, could ease BTC’s progress across the resistance zone.
As a result, the move past that crucial resistance could yield a quick rally to the next psychological barrier of 5,000
- Bitcoin may find it hard to beat the resistance zone of $4,400-$4,430 in short-term.
- A high-volume daily close above $4,430 could be followed by a quick move higher to $5,000.
- The prospects of a rally to $4,400 would drop if BTC falls back below Wednesday’s high of $3,924.
- A daily close below $3,633 would invalidate the bullish setup.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View