Two days ago, after struggling to shake off its Hogmanay hangover, bitcoin suddenly catapulted above $4,000. It was a spike that came from nowhere, and was loudly cheered by many investors.
You would have to go back to November for the last time we saw that fairly crucial $4,050 key level of resistance properly tested.
The reason for it being so critical is that putting a little air between the upward movement above $4,000 is hugely psychological. At $4,050 we can see if that strength and belief will be tested.
If it can hold, then there’s a good chance it will allow the general good mood across the boards to give some lift to an ascent. The optimistic trader would now be looking and hoping for something like $4,400 as the next stepping stone to genuine upward movement.
However, this is the point where you would correctly be waiting for the “but”. And here it is… Something doesn’t quite smell right.
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That spike the other day looked like the freak result of a few very wealthy traders shifting huge numbers around.
We’ve seen this pattern repeated time and time again – a huge spike, then a jagged line as the price bounces along for a little while, before dropping off a cliff at the other side. The resulting pattern on the graph will often resemble the shape of Bart Simpson’s head – the very reason why experts call it the ‘Bart Pattern’.
Are we seeing that right now? Quite probably. In fact, by the time you’ve read this it may have already happened.
Which takes us back to an earlier point – something doesn’t smell right about this apparent recovery.
If we disregard those mysterious traders shifting colossal sums about and causing these unexpected spikes we’re pretty much back to where we have been for the last month or so – bubbling under the $3,800 mark.
If bitcoin were to test the $4,050 level of resistance it would need more robust volume in the market than what we’re seeing.
Again, disregarding those massive single movements, it doesn’t look to have enough beneath it to allow for a climb.
The likelihood here is a slip back below $3,800 with potential for regrouping and recovering from $3,750.
That’s not being negative, that’s being cautiously realistic.
There is, of course, genuine cause for throwing caution to the wind and enjoying a little optimism. You only have to look across the whole cryptocurrency markets to appreciate that.
Plenty of columns are coloured green which gives plenty of suggestion that the appetite is out there.
That being the case, it may well be a good thing to see bitcoin tumble a little in order to give the current wave of enthusiasm enough momentum to swell.
Once the volume builds, the long-awaited recovery should begin.
Coin Rivet is a website bringing news, information, analysis, opinion and insight from the fast-moving blockchain world.