BTCUSD: Bitcoin Price Ripe For a Pullback as Key Technical Level Hit
Bitcoin price has been on a tear this week. Yesterday, the price zoomed above $10,000 for the first time since February this year after Paul Tudor Jones became the latest billionaire to invest in the currency. The price also rose as enthusiasm about Bitcoin halving rose. But, the price could be due for a pullback on several catalysts.
Bitcoin price rises as billionaires buy
Bitcoin price tends to be very volatile and reactive to the smallest news. Yesterday, the rally came after Jones, the billionaire hedge fund manager who predicted the last financial crisis said that Bitcoin was the best asset to invest. He wrote that the metal reminded him of gold, which he now believes will reach $2,400 in the near future.
Jones is not the only prominent person to be bullish on bitcoin prices. On Tuesday, Raoul Pal, a prominent investor said that the current chart pattern opened for an opportunity for the currency to reach $40,000. He focused on the bullish wedge pattern on the weekly chart. Other prominent backers of Bitcoin include Jack Dorsey, the CEO of Twitter and Square, Michael Novogratz, Chamath Palihapitiya, and Mark Yusko, the CEO of Morgan Creek Capital.
Bitcoin prices reversal possible
Amid all the optimism, there is a possibility that Bitcoin price could be setting itself for a big pullback. The most important reason why the price has surged recently is that enthusiasts have been gearing to halving that will happen in the next three days.
In the market, there is something known as buying the rumour and selling the news. Ideally, when something is certain to happen, investors tend to buy or short it. After it happens, the price usually moves in the other side as they take profit and as the dumb money comes in.
Therefore, while the bullish trend may continue in the long-term, there are chances that a major pullback may happen. Another reason is that there will be no major catalyst that will push the price higher.Gold prices are diving as the US trading session gets underway. The move lower in gold prices is fueled by a stronger US Dollar and US stock markets being near their all-time highs, lowering the demand for gold. However, the mood may change in the next few hours as the US ISM Non-Manufacturing Index is due.
Technically, gold prices are trading sideways between the October 11 low of $1473.68, and the October 25 high at $1518.41. The benefit of this well-defined rectangle pattern is that when the price finally starts trending the price should hopefully not look back and reach its target. The pattern also provides price targets.
Also, looking at the BTCUSD pair closely, you realize that the pullback may indeed happen. On the daily chart, we see that the pair rose to a high of 10,0060 yesterday. The price did not land there by mistake since this price is along the 61.8% Fibonacci retracement level. Therefore, I expect a pullback to happen as the smart money sells on the news. If it does, the BTCUSD pair may move to retest the 7,765 level, which is at the intersection of the 50-day and 100-day EMA and the 38.2% retracement level.
On the other hand, a further move above the 61.8% level will mean that the bulls are in total control. As a result, they will attempt to retest the next psychological level at 11,000.