The bulls are back in the Bitcoin (BTC) market. Since March 10, the largest cryptocurrency has gained 35% in price. There are questions among investors and market players about the reasons for this sudden change. In today’s analysis, we present the top five technical arguments behind bitcoin price growth.
The fundamental premise of technical analysis is that the market discounts everything. This means that all available fundamental, political or psychological information is already factored into the price of an asset.
The notion that it is possible to predict price movements of an asset based on any information, news or fundamental changes is wrong. It is technical analysis that can determine what news or changes have already happened or are likely to happen in the future.
Recent news spooked the markets
Meanwhile, many participants in the cryptocurrency market try to understand and predict the price of bitcoin and other assets based solely on fundamental analysis and news. Therefore, the collapse of Silicon Valley Bank, panic in the traditional banking and financial sector, among others, have been cited as reasons for the ongoing upward momentum. While others suggest that the cryptocurrency is rising due to statements from President Biden or positive news on US jobs.
Nevertheless, there are several technical analysis signals that explain the reasons for the ongoing recovery. These appear to coincide with several on-chain arguments that have long confirmed that the worst of the bear market is likely behind us. The separation from the traditional stock market and the loss of BTC’s correlation with the S&P 500 Index (SPX) are also significant.
Here are the top five technical arguments for why bitcoin is up 35% in the past five days.
Top 5 Technical Arguments: Closing the CME Gap
The first is the closing of the so-called “CME Gap”. This is the difference between the closing price of BTC on the Chicago Mercantile Exchange (CME) on Friday and the opening price of the following Monday.
This difference is due to the trading schedule of the CME, which is closed over the weekend. The bitcoin spot market is always open. Historical analysis of bitcoin’s price action shows that in almost every CME gap event, BTC price closes afterwards. Sometimes it happens very quickly, and sometimes you have to wait several months.
On the daily chart of Bitcoin CME futures (BTC!), we see that the CME Gap appeared on January 17, 2023, and remained open for almost two months. Bitcoin tested the $20,000 area again on March 9 and 10, closing the gap (blue circle).
With one CME gap closing almost immediately, another appeared on March 13. This time it covers the $20,300 – $21,100 range. If history repeats itself this time around, bitcoin has a chance to test this territory again in the near future.
Retest of 2017 ATH
The second signal is a re-test of the all-time high (ATH) from 2017 as support. During the bull market more than five years ago, the price of bitcoin reached the almost $20,000 level (green line).
The bear market of 2022 brought down the price of BTC to this level. In the June to November period, BTC price held around this area. However, with the collapse of FTX, which had a profound effect on the entire cryptocurrency market, the price dropped significantly below it, registering a low of $15,470.
The recovery in the cryptocurrency market, which has been underway since the beginning of 2023, has led to a breakout above this historic area. The very long lower wick end of last week’s candle roughly validated this area as support (blue circle). This is a very bullish sign which validates the strength of the recovery of the last three months.
Top 5 Technical Arguments: Bullish Re-Test of the 20W MA
A similar situation to the above is also observed on the chart of the 20-week moving average (20W MA). This key moving average has also been validated as a support, with BTC declining to the $20,000 level.
On the long-term chart of bitcoin, the 20W MA is playing an important role in confirming the direction of the trend. Several upward or downward movements of BTC have followed retests of this moving average. For example, in 2022, the 20W MA rejected the downward trend reversal attempts (red circles) twice, deepening the bearish market.
On the other hand, in the opposite case, when the 20W MA experienced a bullish retest and acted as a support, it was a signal for the bitcoin price to continue rising. This happened in September 2020 and September 2021 (blue circles).
The current price action is similar to this bullish scenario. The bullish retest of the 20W MA provides another argument for continuation of the upward move.
Bullish retest of the descending resistance line
Another bullish test of the long-term diagonal resistance line was another reason for the rise in bitcoin price. This is the line on the logarithmic chart of BTC, which reaches the current ATH of $69,000 by November 2021.
This year’s recovery in the cryptocurrency market led to a breakout above this key resistance in late January 2023. It was first confirmed as support in mid-February. Now – with a drop in the $20,000 area – bitcoin price has made this bullish retest (green circle) for the second time.
Top 5 Technical Arguments: VPVR Support
The last of the top five technical arguments explaining the 35% bitcoin price increase is the Volume Profile Visible Range (VPVR) metric. This indicator determines the trading volume for the visible areas of the asset’s price. It is used to identify important price levels that could potentially serve as resistance or support.
Applying VPVR to the daily chart of BTC price over the past nine months of accumulation, it reveals that the $20,000 level (red line) is again the most important. This is the area where most of the coins have been transferred. Hence, it can be expected to act as support (blue circle) after it recovers.
This is exactly what happened, and the VPVR indicator adds another argument explaining the bullish price action of BTC over the past five days.
For previous Bitcoin (BTC) analysis from BeInCrypto, Click here,
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