Bitcoin’s unexpected price jump saw the cryptocurrency jump almost $600 in just over thirty minutes of trading on Tuesday, July 17, 2018. By Wednesday morning, the price settled at $7,370, with signs of continued upward movement.
Naturally, many investors are worried about a potential pump-and-dump cycle, while others throw caution to the wind and dive into the market head first. Is this a sustainable price leap, or merely a short-term jump before crashing back into bear market territory?
Bitcoin Has Surpassed its EMA
An Exponential Moving Average (EMA) is a signalling tool used by traders to gain insight into the factors pushing momentum behind any substantial market movement. It is used to verify the status or existence of a market trend by comparing the asset’s current price with its EMA. If the EMA is sufficiently long, traders can place a market movement within its right context and assign it a level of significance.
Bitcoin’s 55-point EMA from May 11 to July 16 shows that it was above the price, which had a barrier effect, ensuring that bitcoin’s price was unlikely to move past $6,860. This held true until Tuesday afternoon, ensuring that the bitcoin market remained bearish.
That all changed yesterday, however, as the surge has forced bitcoin’s EMA below the current price, which indicates that the movement is significant and out of the norm for the period it measures. That, in turn, signals that the market is entering a bull phase as it makes significant upward moves. Fibonacci extensions can also be used to back up this analysis.
Using Fibonacci extensions, traders can predict the position and level of price resistance or support for an asset. In the case of bitcoin, drawing an extension from its lowest price to its highest over a specific trading period can give an idea of how much price resistance exists, which tells the trader whether or not a retracement is likely.
Bitcoin’s Trading Volume Doubled in 24 Hours
A key market indicator that traders use to analyze price movements is trade-volume. When volumes are low, a few transactions can significantly skew the market in a manner that is not necessarily significant in the long term. This is usually the case with newly listed tokens available on just one exchange. The low liquidity and resultant low volume mean that any strong buy or sell orders can swiftly boost or tank the token price without having any significant long-term implication on its value.
In the case of bitcoin yesterday, its traded volume reached a three-month high, nearly doubling its traded amount just a day before. What this tells traders is that the $7,000 is not the result of low trade volumes alongside a few large buy orders. If trade volumes are at a three-month high and the asset’s price is trending upward, that means that the new over-$7,000 price could be here to stay for a while.