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Analysis

What Bitcoin trading in this consolidation phase holds for the future

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Bitcoin in a phase of consolidation, with a bullish tinge
Source: Pixabay

Disclaimer: The findings of the following analysis are the sole opinions of the writer and should not be considered investment advice

Bitcoin Dominance had found a bottom at 39.5% in January and has slowly been rising. This indicated that the capital flow was directed toward Bitcoin and away from altcoins. Moreover, the USDT (Tether) Dominance has also fallen from 4.87% last week, to 4.28% at press time, which suggested that market participants were beginning to deploy their capital into crypto assets after sitting on the sidelines with Tether. A recent report on Bitcoin noted that a period of heightened volatility may be around the corner. What can we expect from the king of the crypto sphere on the price charts?

BTC- 1D

Bitcoin in a phase of consolidation, with a bullish tinge

Source: BTC/USDT on TradingView

The downtrend of Bitcoin began when the $59.1k level was broken and tested as resistance, and this downtrend appeared to last till early February. However, in early February, Bitcoin rallied to $45.8k, a local high.

Crucially, this mark was higher than the most recent lower high of the BTC downtrend at $44.6k. At the same time, the price also registered higher lows. This meant that, at the very least, the downtrend had stalled.

The $45.8k zone represents a strong zone of supply, and all the way to the $52k, the chart is crowded with areas where sellers are expected to be strong. Therefore, while a longer-term bearish bias has weakened considerably, the bulls were not in the driving seat either.

Rationale

Bitcoin in a phase of consolidation, with a bullish tinge

Source: BTC/USDT on TradingView

The indicators painted much the same picture for Bitcoin. The RSI had crossed over above the neutral 50 line, after nearly a month of struggle. The MACD also formed a bullish crossover and climbed above the zero line. Both of these indicators showed that the hold of the bulls on the market had weakened- but not necessarily that bullish momentum was strong.

The OBV went a step further in highlighting how, despite a break in market structure, the demand from buyers was simply not strong enough. The OBV has been on a downtrend since November- and has climbed somewhat since January (higher lows). Yet, this development was likely not enough to spark a new move to the upside.

Conclusion

The price of Bitcoin appeared to be consolidating, as buyers and sellers fought fiercely over each significant horizontal level. The $44k-$45k area was a strong band of resistance, with $48k as a resistance level as well. To the south, the $38k level and the $35k-$36.4k area could act as support.

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Akashnath is a Chemical Engineering graduate deeply fascinated by Technical Analysis and the crypto markets and enjoys studying price movements and trying to find patterns.

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Disclaimer: AMBCrypto's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.