Bitcoin Bulls Run Out of Steam – Pullback Likely?

BTCUSD Header 2019-03-19

The upward-swinging price of the top cryptocurrency ran into predictable resistance at the $4,000 mark. The bulls yet again failed to breach the resistance level represented by the 21-week MA and it looks like this formidable hurdle will continue to hold them back.

All this played out against the backdrop of increasing trading and on-chain traffic volumes. What is the current outlook?

Bitcoin bulls do not pack much of a punch lately. They get easily thrashed every time they muster the courage to approach the $4,000 psychological resistance. The fact that the 21-week MA – a very strong resistance of the last few weeks – is also located nearby, does not help them either.

Currently trading at $3,972, the price of BTC needs to break above $4,000 soon. That is what’s required to defang the doji candle that popped up yesterday, signaling the capping of the rally.

The 4-hour chart features a bull flag pattern, which effectively sets the targets for the bulls as well as the bears.

BTCUSD Chart 2019-03-19

By going above $4,000, the price will have broken out of the flag upwards. In this case, a rise to above $4,073 (the 21-week MA), would be in the books. It would take much more to break through that level in a convincing manner however.

In the case of a downward breakout (a drop below the $3,930 mark), a path would be opened to the support of $3,890 first and then to $3,755.

Increased trading/on-chain transaction volumes

As mentioned, something working in the favor of the bulls could be the increasing trading volumes.

A lot has been said about these promising volumes over the last few days. Talking heads and technical analysts have chimed in on it, with many stating that most of the increase could be attributed to exchange-based wash trading.

Still, there is no way around the fact that actual on-chain volumes have increased as well.

In addition to a subtle but potentially significant increase in Google search volumes related to Bitcoin, these trading volumes may well signal the beginning of the accumulation period.

If that is indeed the case, it is safe to say the bottom of this bear market is now safely behind us.

What do the fundamentals say?

The fundamentals have been notoriously healthy through the latter part of the current bear market.

The currently trending news are not a bad bunch either.

Japanese regulators are looking to crack down on cryptocurrency margin trading in the country. To this end, they have drafted a new set of rules, set to go into effect next year.

According to these new rules, the cap on cryptocurrency margin will be set in the 1:2 and 1:4 range.

All venues that offer cryptocurrency margin trading will be required to register with the Japanese authorities.

Already existing licensing does not exempt operators from this registration requirement.

In other news: IBM has moved to introduce its banking clients to cryptocurrency. The centerpiece of the initiative is IBM’s World Wire, which is based on the Stellar public blockchain.

The participating banks – some six of them for now – have effectively committed to issuing stablecoins, which will facilitate the cross-border transfer of value. Such an approach will result in increased efficiency and reduced costs.

While the network has already come online on Monday, the construct is still awaiting regulatory approval.

Similar to Ripple’s proposition, the scheme may eventually resort to using the Stellar network’s Lumen native token as a bridge currency.

The resulting ecosystem will be fertile ground for the tokenization of fiat currencies, and eventually, for the emergence of central bank digital currencies.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.