Bitcoin Could be Nearing Bull Territory as Technical Indicator Turns Positive
Ever since Bitcoin touched the low-$3,000 region in mid-December, its price has been gradually increasing and just yesterday broke above the $4,000 price level for the first time in a couple of weeks.
Bitcoin’s relatively positive price action since it set its 2018 low around $3,200 has led one widely viewed technical indicator to turn positive for the first time in months, which could signal that increased buying pressure is right around the corner.
Indicator Claims Bitcoin is Entering Positive Buying Phase
Per a recent report, a commonly used technical indicator called the Directional Movement Index (DMI) suggests that Bitcoin could see some price gains in the coming days or weeks, with the indicator being based on buying and selling trends with historical accuracy.
The DMI, which separates price movements into a positive directional and negative directional movement category, indicates the relative strength of the asset’s buyers and sellers and bases the results off of data regarding the strength of the bulls versus the bears.
With regards to Bitcoin, the DMI flipped positive for the first time in several months, which means that Bitcoin could see a large, albeit temporary, surge in buying pressure.
The report explains that the DMI is currently showing that Bitcoin’s buying pressure is increasing, while its recent selling pressure – which was ranked as being “very strong” – is subsiding. It is important to note that this indicator is most commonly used for short-term trading, and typically doesn’t offer much insight into long-term trends.
Mati Greenspan, senior market analyst at eToro, discussed the current technical indicators in the report, noting that although technical analysis is showing growing strength for Bitcoin and the crypto markets in general, its price must break above $5,000 in order for a strong bullish case to be made for the long-term.
“In technical analysis this makes these levels very strong. But I think only once we see a strong break above 5,000, 6,000, if we get above 7,500, that’s when people start to turn really bullish,” Greenspan explained.
What Bitcoin’s Price Action Could Mean for the Crypto Markets
Historically, Bitcoin leads market trends, with the altcoin markets rarely bucking its trend and moving in their own direction.
Currently, most altcoins are experiencing a relatively mixed trading session as investors wait to see if Bitcoin is able to maintain above $4,000 for an extended period of time. At the time of writing, Ethereum and Bitcoin Cash are both trading down 3%, while XRP is trading up marginally and Stellar is trading up just under 3%.
Apart from events influencing individual altcoin prices, like Ethereum’s upcoming Constantinople fork that is expected to occur around January 16th, the markets will likely continue to follow Bitcoin’s lead.
For now, different analysts have differing opinions regarding the state of individual altcoins, with The Crypto Dog, a popular cryptocurrency analyst on Twitter, telling his followers that Ethereum’s chart is currently looking bearish despite its upcoming fork.
“I’m not sure either way of course, but I find it really hard to be particularly bullish on $ETH / $USD with the $ETH / $BTC ratio pair looking like this… Maybe just a small pull-back was due, but as of now ETH doesn’t look particularly compelling to me here,” he explained.
How Bitcoin’s price acts over the coming days will likely set the tone for how the markets will fare in the weeks and months ahead.
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