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Bitcoin price surged 15%, but it is still difficult to return to $8,000! In yesterday's article, I pointed out that "Bitcoin currently needs to convert the previous resistance level of $6,600 into support. Once it can stand firm, Bitcoin will test $6,900 again. Above $6,900, $7,100 to $7,200 may constitute a very strong resistance."

Yesterday, Bitcoin almost always stayed above $6,600, and then from the evening, Bitcoin suddenly started a wave of upward rebound, and once rebounded to $7,260.

However, as mentioned in yesterday's article, there was very strong resistance between $7,100 and $7,200, and Bitcoin quickly fell back after rising. Currently, the price of Bitcoin fluctuates around $6,800.

But the good news is that we find that Bitcoin is constantly creating higher highs. At the same time, Bitcoin's market dominance remains above 66%.

Bitcoin's monthly candlestick chart

From the monthly candlestick chart, due to the plunge on March 12, Bitcoin's closing price in March was already below the 20-month moving average, and it was also the first time in the last 11 months that it closed below $6,500.

It should be noted that due to the previous large-scale sell-off, Coinbase's Bitcoin trading volume in March also hit the second highest level in history, second only to December 2017.

In addition, the volume VPVR indicator shows that there is strong support at the high volume node of $4,000. And in the past, Bitcoin's price has never spent too much time between $4,000 and $6,500. So, although Bitcoin has experienced an unusually bad month, it is clear that Bitcoin is now slowly getting out of the downturn.

Bitcoin's weekly chart

From the weekly chart, Bitcoin prices have risen for three consecutive weeks, but there is currently a diagonal resistance level at the $6,800 level. Above is the resistance line of a descending channel formed since July 2019.

On the bright side, the 200-week moving average is currently a strong support. However, the next rebound in Bitcoin prices is likely to encounter strong resistance at the 20-week and 100-week moving averages, as these two levels have always been very important support and resistance levels in determining whether the market is bullish or bearish.

In addition, the volume-weighted average price so far this year is $7,100, and the 100-week moving average is also located at this level. So, this position may be very important.

Overall, the current 200-week moving average ($5,588) and 100-week moving average ($7,095) are two very important support and resistance levels, respectively, and the latter is currently under attack by bulls.

The bad news is that although Bitcoin has continued to rise in the past three weeks, the volume has been significantly reduced, and there are signs of bullish divergence.

4-hour candlestick

On the 4-hour candlestick, Bitcoin prices are forming a series of higher lows, and a key head and shoulders top pattern has not been successful before, which are all good short-term signals for bulls.

But overall, the RSI indicator is currently overbought, and the 4-hour K-line still shows that the volume is decreasing.

Bitcoin futures data from the Chicago Mercantile Exchange

The Chicago Mercantile Exchange (CME) released a trading report last Friday that aggregates the net trading positions of traders of different sizes to determine the overall directional positions of each category.

The red line in the figure shows large traders or institutional traders, and it is easy to see that they are almost always shorting Bitcoin. And in 2020, their short positions doubled, and the opening prices were generally between $8,200 and $10,700, until the price of Bitcoin fell from $8,000 to $4,000 before closing.

So, if we assume that institutional investors will still have an interest in shorting in the previous range, that is, above $8,200. Then Bitcoin's rebound is likely to encounter resistance at this level. So next, we also need to pay attention to the actions of large traders on CME.

In addition, we can also observe the Bitmex funding rate in the chart. Historically, Bitmex's funding rate is inversely proportional to the price direction. Now, Bitmex's funding rate has turned slightly positive again, indicating a bullish shift in the market. In other words, market sentiment may have turned, and another wave of pullback is likely to occur next.

Outlook

Due to the intersection of technical indicator resistance and institutional short selling interest, any subsequent rebound in Bitcoin may encounter strong resistance at the $8,000 level.

For now, if Bitcoin wants to continue its upward trend, it first needs to stand above $7,100, and this resistance level will be converted into support.