Bitcoin prices are spiking as demand for the digital currency explodes. Can it keep up the momentum?
Bitcoin has exploded in value over the past two days, on Tuesday sporting a gain of 20% off yesterday’s low.
For what it’s worth, ethereum is doing pretty well, too. At today’s high, the cryptocurrency was up 18.3% from Monday’s low, although it’s starting to fade this afternoon.
Bitcoin and others are in focus amid the turmoil in Eastern Europe.
Thomas Westwater, an analyst at DailyFX, said, “Russian oligarchs and others who fear being impacted by the sanctions may be fleeing to bitcoin, given its perceived insulation from the traditional financial system.”
Is that enough to move bitcoin — which has a market cap of $830 billion — so significantly? Probably not.
But when you throw in everyone else, like citizens in Russia looking to escape the collapsing ruble and Ukrainians looking for more efficient ways to move money — plus traders jumping on the bandwagon — it’s not impossible to think that bitcoin is receiving a huge influx of demand.
I don’t know whether that makes the crypto a safe-haven asset like gold, U.S. dollars or Treasury bonds. But its digital nature and liquidity do have some attractive features for those worried about sanctions and fiat currencies.
Trading Bitcoin
Daily chart of Bitcoin.
Chart courtesy of TrendSpider.com
From the November highs north of $60,000, bitcoin prices have pulled back hard. After recently bottoming at $32,921, bitcoin rallied up to the $45,000 area where it met resistance.
That’s not too surprising given that this area was a failed support level from early January.
In any regard, it doesn’t matter because the rally gave bitcoin a higher high to work with. In other words, it snapped its streak of lower highs. Then, the cryptocurrency did bulls one better: It gave them a higher low to work with, too.
Now we’re seeing an upward channel form as bitcoin is trying to base and move higher while holding up over its 10-day, 21-day and 50-day moving averages.
Here’s the problem: It’s entirely possible that we’re seeing some sort of bear flag pattern here, which is a bearish consolidation pattern, setting up the next wave of selling.
If that’s the case, it puts the $33,000 area back in play. Below that puts the $29,000 to $30,000 area in play, which was a major support zone over the summer.
That’s not to say this is a doom-and-gloom setup for bitcoin. There are definitely some positives here.
Specifically, I’m keeping an eye on this $45,000 area, which has been notable resistance in 2022.
If bitcoin can clear this area and go monthly-up over $45,900, it will also propel the crypto above the weekly VWAP measure.
Above the 50-week moving average could propel bitcoin to the 200-day and 21-week moving averages, then the $50,000 level.
