Bitcoin is still trending higher inside its rising channel on the 4-hour time frame and continues to test resistance at the top. A break above this area could set off a steeper rally from here.
The 100 SMA is safely above the 200 SMA to confirm that the path of least resistance is to the upside or that the ceiling is more likely to break than to hold. In that case, bitcoin could make its way to the next Fibonacci extension level of 61.8% or $9,675 or the 78.6% level that is close to the $10,000 barrier. The full extension is located at $10,574.26.
However, RSI is turning lower after recently hitting the overbought region, indicating that selling pressure could still pick up from here. Stochastic is also indicating overbought conditions or exhaustion among buyers, so turning lower could signal profit-taking.
If that happens, bitcoin could still retreat to the channel bottom around $8,750 and near the 100 SMA dynamic inflection point.
Bitcoin has drawn a lot of support from the return of risk aversion in financial markets on account of the WHO declaring the coronavirus outbreak as a global pandemic. This could take a chunk off China’s overall growth figures and therefore weigh on business sentiment and demand.
In turn, this is dampening gains for stocks and commodities worldwide, leading investors to look for higher returns elsewhere. With the looming halving of mining rewards and the resulting increase in value, bitcoin is looking like a viable alternative.
Looking ahead, worsening headlines on coronavirus cases and fatalities could keep a lid on stock market gains, thereby increasing demand for bitcoin and other cryptocurrencies. Note that central banks have also been leaning towards easier monetary policy, which is also discouraging traders from putting funds in fiat currencies as well.
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