By Jamie Holmes
Bitcoin posted the longest winning streak of consecutive gains on the daily timeframe since the 2017 bull market, but this upward move was cut short around the $42,400 level. After this 10-day winning streak, bitcoin then printed four back-to-back red candles on the daily chart, but now it seems like bulls are back in control with a daily close above $40,000 on August 5th.
Bitcoin’s fundamentals are improving after a steep drop in the number of active addresses and transfer volume. The chart below shows that the 7-day moving average active addresses have recovered after hitting a low for 2021 on July 2nd (745,683) and have increased to 810,764 as of August 5th.
Transfer volume has also picked up since July 25th, bouncing from around $5 billion to 8.78 billion as of August 5th. For continued bullish price action, we’d want to see a continued rise in these two on-chain metrics.
The chart below shows that from July 21st to July 30th, bitcoin rose from around $30,000 to a high of around $42,400. Applying the Fibonacci retracement and extension level, we can see that the market found support at the 0.618 Fibonacci level at $37,527.20, testing this level three times since August 3rd.
August 5th’s closing price was above the next Fibonacci level at $39.471.69 and immediate resistance is provided by the Fibonacci level at $42,614.85. Bulls are looking to target the first Fibonacci extension level at $46,237.47 in the event of a breakout above $42,614.85. However, a break below $40,000 could open up the $37,500 level, which has held as support over the past few days.
Let’s take a look at the Bolling Bands on the daily chart. We can see below that volatility has increased since mid-July and the price of bitcoin touched the upper Bolling band during the last few days of July.
After the price cooled off between July 31st and August 3rd, the downward move reversed as bitcoin approached the middle Bollinger band. With the price moving higher one more, the upper Bollinger band (currently at $44,821) provides a sign of where the next upward move may falter. The middle band is currently just below $37,000 and should provide support in the event of a downturn.
Let’s now take a deeper look at the market utilizing heatmaps to illustrate the order book and areas of high liquidity on the price chart.
The hourly chart below shows that there is a lot of interest to sell above $41,000, with sell walls at $41,300, $41,700, $42,000, $42,300 and $42,500. These areas, except for $42,000, have only seen large offers added around in the early hours of August 6th and have acted to skew the price to the downside.
The nearest buy wall lies near $40,400, so traders should watch this level as a break below $40,400 could see the price of bitcoin trend below $40,000 once more. The chart above shows that a sizeable amount of bids lie at the $38,000, $37,500 and $37,000 levels. Therefore, the path of least resistance is to the downside as the price has retreated from the $41,000 level and the price is currently just below a significant sell wall (and quite far from the nearest significant buy wall).
Looking at the 15-minute chart, the areas of high liquidity are shown, with some buy interest seen at $39,000, along with the more significant buy walls at $38,000, $37,500, and $37,000. To the upside, $41,300 needs to be broken for a continuation of the uptrend that’s been established over the past 24 hours.
The 15-minute chart above clearly shows that during the upward move on Thursday that buyers were lifting the offer and moving the price higher (as shown by the green bars on the volume delta). However, market buys slowed down as the price hit $41,000 with the sell wall absorbing the bullish momentum.
In summary, buyers need to display strength to move the price above $41,400 and the recent high of $42,614.85 for a continued push higher. However, there’s little buying interest at the time of writing between $40,000-$39,000, suggesting the weekend’s price action could dip back to the psychological level at $38,000 and the strong support level at $37,500.