- Bitcoin closed above a crucial resistance area Wednesday.
- The ceiling was instrumental in beginning a new bull run back in 2019, wherein the price surged by 239%.
- Traders’ optimism for bitcoin has peaked ahead of its mining reward halving in May 2020.
Bitcoin resumed its winning streak Wednesday as its price edged further closer towards $8,000.
The bitcoin-to-dollar exchange rate rose 1.53 percent to $7,878 a token, a move that brought the pair above its 20-weekly exponential moving average. The price curve was instrumental in sending bitcoin up by 239 percent back in 2019 – from $4,051 to $13,868 on Coinbase.
A break above the 20-WMA in January 2020 also led the prices up by 28.62 percent to above $10,000. Nevertheless, bitcoin failed to extend the rally as the coronavirus-induced fears led investors to panic-sell their crypto positions in March 2020.
But the cryptocurrency’s break above the 20-WMA this time comes ahead of its mining reward halving. The event would reduce bitcoin’s daily supply output from 1,800 BTC to 900 BTC. The last two halvings resulted in exponential price rallies. Traders anticipate the third event would lead to a bitcoin price boom.
“We are now two weeks from the anticipated BTC halving, and levels of discussion have expectedly risen with the price,” wrote crypto researcher Santiment. “Interest levels [on social media] are mostly correlating with positive momentum, meaning crowd consensus is widely optimistic about this.”
Breaking above 20-WMA not always resulted in exponential price gains. In 2018, when bitcoin was undergoing one of its longest bearish corrections, it broke above the curve on nine weekly occasions but failed every time to hold it as support. But, at the same time, there was one additional fractal at play.
Bitcoin was trading above its 50-weekly moving average, or 50-WMA, on 7 out of 9 occasions. The cryptocurrency used the long-term wave as its support to retest 2o-WMA but failed to pierce above it for too long.
Nevertheless, 50-WMA flipped to become Resistance after the price closed below it in May 2018. It left bitcoin under the shadow of two strong resistance waves. So even if the price broke above 20-WMA, it had to pullback after testing 50-WMA.
Bitcoin’s latest price action mirrors the same 2018 scenario. The cryptocurrency has broken above 20-WMA but cannot confirm a bull run unless it extends its move beyond 50-WMA.
Bitcoin to $9,000?
The doubtful scenario has not deterred bitcoin from registering short-term gains. The cryptocurrency could still rise towards $9,000 to test 50-WMA for a breakout – the wave is near $8,700 as on April 29.
On the other hand, a real upside break could lead bitcoin towards $10,000-$11,000 resistance, especially amidst the halving FOMO. That is evident with the rising number of accumulators ahead of halving, as reported by data analyst Glassnode.
“The number of BTC whales continues to grow, hitting 2-year highs – the last time we saw this many during an accumulation phase was in 2016,” said the firm. “This becomes interesting when we compare it with the last Bitcoin halving.”