Altcoins could also see a strong buying interest and may run up vertically if Bitcoin rallies above $30,000.
Bitcoin (BTC) rallied from an intraday low at $17,573.29 on Dec. 11 to an intraday high at $29,310.19 on Dec. 31, a 66.78% rally in a short span. This shows strong demand from traders at every higher level.
Institutional crypto investment giant Grayscale bought 72,950 Bitcoin in December, which was 159.49% more than the 28,112 Bitcoin mined during that period, according to data from Coin98 Analytics.
It is not only the institutions buying — a strong bull run also attracts speculators and momentum traders who try to piggyback on the up-move. This can be seen from the surge in Bitcoin’s transaction volume in December 2020, according to on-chain analytics resource Digital Assets Data.
However, at some level, buyers will stop chasing prices higher, and that could cause the rally to turn down. When it does, the speculators and momentum traders may rush to the exit, and the buyers are likely to wait for lower levels to purchase again. This scenario could result in a sharp pullback. Hence, traders should employ suitable risk management strategies.
In a strong bull run, traders may watch the resistance levels for signs of a possible turnaround, but when the levels are scaled with ease, it shows that the trend remains strong. Let’s study the charts of the top 10 cryptocurrencies to identify the critical resistance levels on the upside.
Bitcoin (BTC) is in a strong uptrend, and traders are buying every intraday dip without waiting for a deeper correction. The long-legged Doji candlestick pattern on Dec. 31 suggests that bears tried to start a correction but the bulls bought the dip aggressively.
However, the strong up-move of the past few days has pushed the relative strength index (RSI) deep into the overbought territory. This suggests the BTC/USD pair could enter a minor consolidation or correction near the $30,000 mark.
Contrary to this assumption, if the bulls drive the price above $30,000, the pair could continue its rally and rise to $37,000. But with every leg up, the risk to the downside increases.
If the price turns down from $30,000, the pair could drop to the 20-day exponential moving average ($24,842). A strong rebound off this level will suggest that the uptrend remains intact, but a break below it could pull the pair down to the 50-day simple moving average ($20,614).
Ether (ETH) has been facing resistance near the $750 level for the past few days, but the positive sign is that the bulls have not given up much ground. This suggests that traders are not booking profits aggressively, as they expect the uptrend to resume.
If the bulls can push and sustain the price above $750, the ETH/USD pair may rally to $800 where the bears may again try to stall the uptrend. The rising moving averages and the RSI near the overbought zone suggest that bulls have the upper hand.
However, if the pair dips below $717, the correction could deepen to the 20-day EMA ($663). If the price rebounds off this support, it will suggest that the sentiment remains bullish and traders are buying on dips.
On the contrary, a break below the 20-day EMA will suggest that traders are not buying the dips and are booking profits aggressively. That could signal the start of a deeper correction.