Bitcoin looks set to test falling channel resistance at $12,030, having invalidated a bearish lower-highs pattern earlier today.
The rise in bitcoin’s dominance rate to the highest level in over two years indicates the price rise is sustainable.
A UTC close above $12,030 would confirm the falling channel breakout and allow a rally to $13,880 (June 26 high).
The bull case would weaken if BTC closes today (UTC) below $11,120, although that looks unlikely.
Bitcoin (BTC) is eyeing a move to key resistance above $12,000, having broken out of a bearish pattern in the Asian trading hours today.
The leading cryptocurrency jumped above $11,120 at 00:45 UTC, violating the bearish lower-highs pattern created on July 20 and extended gains to $11,868 at 07:30 UTC. That’s BTC’s highest level since July 12, according to Bitstamp data.
With the price rise, BTC’s dominance rate – the cryptocurrency’s share of the total crypto market – has jumped to 67.9 percent, the highest level since April 12, 2017, according to CoinMarketCap.
Many observers consider price gains sustainable if they are backed by an uptick in the dominance rate.
For instance, Vinny Lingham, co-founder CEO of identity protection and management startup Civic, put out a series of tweets on April 10, explaining how alternative cryptocurrencies decoupling from the BTC rally would be a sign of substance in the bull run.
With the dominance rate validating BTC’s 9.5 percent price rise in the last 24 hours, further gains toward resistance at $12,030 look likely. Technical indicators are also signaling a continuation of the price rise.
As of writing, BTC is changing hands at $11,710 on Bitstamp.
Daily and hourly charts
BTC’s move above the bearish lower-high of $11,120 (above left) is backed by a bullish above-50 reading on the relative strength index (RSI). Further, the moving average convergence divergence (MACD) histogram continues to gain altitude, another sign of strengthening bullish momentum.
What’s more, BTC has found acceptance above the 50-day moving average (MA). Also, the 5- and 10-day MAs are trending north, indicating a bullish setup.
As a result, a rise to the upper edge of the 1.5-month-long falling channel, currently at $12,030 looks likely. Supporting the bullish case is a pickup in the buying volumes (green bars), as seen on the hourly chart (above right).
A high-volume UTC close above $12,030 would confirm the channel breakout and open the doors to a retest of $13,880 (June 26 high).
The bullish case would weaken if BTC prints a UTC close below $11,120 today, leaving a daily candle with a long upper wick in its wake – a sign of buyer exhaustion.
That, however, looks unlikely, unless China’s yuan recovers lost ground.
It is worth noting that China’s offshore Yuan exchange rate (CNH) fell from 6.97 yuan per U.S. dollar to a multi-year low of 7.1085 per USD in the 60 minutes to 02:00 UTC today.
Meanwhile, BTC picked up a bid around $10,980 at 00:00 UTC – an hour before CNH began falling against the dollar, as seen in the chart below.
The price action seems to have convinced the crypto market community that yuan’s drop below the major psychological level of 7 per USD fueled a rally in BTC’s price – that is, wealthy Chinese investors rotated money into BTC amid the yuan’s depreciation.
Some observers, including prominent analyst Alex Kruger, wondered earlier today whether BTC had front-run the People’s Bank of China’s (central bank) decision to allow the yuan to slide beyond 7 per USD.
If that narrative continues to strengthen, then BTC may become vulnerable to a bounce, in yuan, if any. However, as of now, the yuan is showing little sign of life, currently trading at 7.08 per USD.
Disclosure: The author holds no cryptocurrency assets at the time of writing.
Bitcoin image via Shutterstock; charts by Trading View