Bitcoin is hovering precariously just above the $7,400-500mark, a psychological support level and a technical edge of a “deep cliff”. The question racing through investors’ and traders’ minds is whether BTC will overcome the strong bear momentum witnessed in November, or bounce back in a trend resumption reflecting gains of late October. As it is, there is some room to wriggle. Bulls and bears are clashing, but buyers seem to have an advantage judging from increasing trading volumes.
Bitcoin Trading Volumes Remain High
There are several reasons why technical analysts are optimistic and expecting Bitcoin to recover. Even though Bitcoin is down double digits week-to-date, losing 12.7%, technical indicators are pro-bulls. Reason? Trading volumes.
As a decentralized asset that is also the most valuable, the coin has utility, a fact that the US SEC admits. Over time, BTC has evolved to be a reliable store of value, an alternative to gold, and a medium of exchange. Lightning Network proves that Bitcoin, despite the limiting transaction fees, can be used for micro-payments, a positive development that is overly bullish.
Across the board adoption, development of complex derivative products and increasing awareness contribute positively to BTC transaction volumes, a positive indicator revealing the strength of the base and how most people are currently holding their BTC stash.
Divergence with Price
The divergence between price and trading volumes is good news for HODLers. From an effort versus result perspective, dropping prices present an opportunity for aggressive traders to capitalize, enter long positions and wait for BTC to edge higher as long as prices are steady above $7,400, the main support line.
All this is because of the bears’ inability to wipe out gains of Oct 25-27 with the same velocity witnessed in late October. Note that gains made from Oct 25-27 took over three weeks to reverse. Besides, accompanying these losses were markedly low trading volumes, which did not eclipse the average posted on Oct 25-27.
Technically, those are bullish signs, and strong indicators that BTC could bounce back in a contrarian move, setting the pace ahead of the highly anticipated May 2020 halving.
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Source: Coin Gape