Strong Bitcoin Volumes Bode Well for Price Breakout



  • Bitcoin’s daily trading volume remains elevated at highs above $10 billion, as opposed to the technical theory that investor interest tends to drop during consolidation. Therefore, the ongoing consolidation near $3,900 is likely to end with a bull breakout toward the recent high of $4,207.
  • The recovery rally from the lows near $3,400 seen in early February was also backed by strong volumes. So, the odds of BTC reversing the corrective bounce in the near-term are quite low.
  • Markets may test bull’s strength with a drop below $3,865 (March 12 low) as the consolidation has gone on for too long. That said, the short-term outlook would turn bearish only if the higher low of $3,743 created on March 3 is breached.

Bitcoin’s current period of price consolidation may end with a bull breakout, price-volume analysis indicates.

While the cryptomarket leader is lacking a clear directional bias for the tenth straight day, 24-hour trading volume remains elevated near the 10-month high of $10.75 billion seen on Feb. 24, contradicting the popular theory that investor interest drops in the rangebound market.

So, the pullback from recent highs near 4,200 is likely nothing more than a bull breather and prices could soon draw bids.

Validating that argument is the fact that the recovery rally from the lows near $3,400 seen on Feb. 8 was backed by strong hands. Daily trading volume jumped above its 50-day moving average 35 days ago and has remained above the key metric ever since – a feat last observed during the height of the bull market in the third quarter of 2017, according to CoinMarketCap.

Hence, the probability of BTC ending the ongoing consolidation with a strong move to the downside is quite low.

As of writing, BTC is trading at $3,930, representing a 0.5 percent gain on a 24-hour basis, according to CoinMarketCap. Twenty four hour trading volume is seen at $10.62 billion, while the 50-day moving average of daily trading volume is seen at $7.615 billion.

Daily chart

As seen above, BTC jumped 7.5 percent on Feb. 8 (arrow), invalidating the immediate bearish setup. The strong move to the higher side was backed by a jump in trading volumes above their 50-day MA. Since then, volume bars have consistently printed above the key average, validating the corrective rally from $3,400.

The setup looks even more bullish if we take into account the higher lows and higher highs on volume bars. Put simply, price pullbacks were accompanied by a drop in volumes. That explains the weak follow-through to the rising channel breakdown witnessed on Feb. 24.

The failed breakdown coupled with an elevated volume amid price consolidation indicates scope for a re-test of $4,208 (Feb. 24 high).

That said, the consolidation has gone on for too long and in such cases, markets test bulls’ resolve to keep prices higher with a minor drop. Hence, a brief drop below the immediate support of $3,865 (March 12 low) could be seen before a move higher.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

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