- Bitcoin is on the cusp of wrapping its second quarter with more than 40 percent gains.
- The cryptocurrency’s remarkable rally comes despite weeks of choppy price action in $9,000-$10,500 range.
- Meanwhile, it risks paring a portion of its gains in the next quarter based on historical evidence.
Bitcoin is on the verge to close its best financial quarter in nine months, a remarkable price rally even as the rising number of coronavirus cases bring economies to a standstill.
More than three months ago, traders flipped their medium-term bias for the cryptocurrency to extremely bearish. The sentiment switched after Bitcoin crashed by more than 60 percent in less than 24 hours. The crash took place as governments all across the world imposed strict lockdowns to contain the spread of the novel coronavirus.
Investors also exited their positions in traditional markets, sending the major U.S. stock indexes down by more than 35 percent in just less than six weeks. Even conventional safe-haven assets, such as gold and sovereign bonds, fell in tandem with the risk-on market.
On the other hand, the U.S. dollar index surged dramatically, indicating that investors were selling their assets for cash.
Partly thanks to a remarkable $3 trillion emergency package from the Federal Reserve and the U.S. Congress, followed by a surge in trading by retail traders, a rally lifted a battered risk-on market from its nadir. That also helped Bitcoin, a different asset, rebound by more than 150 percent.
Choppy after Rally
Bitcoin is now close to finishing the second quarter over 40 percent higher. The cryptocurrency’s price rally has cut its year-to-date losses from -46 percent on March 13, 2020, to +33 percent on June 30, 2020. Nevertheless, the past few weeks have signaled a shift in Bitcoin’s short-term bias from bullish to neutral.
It is because of the cryptocurrency’s inability to secure a price breakout above a critical resistance range of $10,000-$10,500 and an equally astound support level near $9,000. Even at its Q2’s close, it is struggling to break support below $9,100, validating a choppy sentiment as its volume and volatility plunge.
Technically, BTCUSD is trading inside what appears to be a Symmetrical Triangle (bold red). The pattern has developed during an uptrend. It generally points to a bullish continuation if the pair manages to break above the Triangle’s upper trendline.
Meanwhile, BTCUSD is also hinting to have been consolidating inside an Ascending Triangle. It is again a bullish continuation pattern that envisions a price breakout towards $12,000.
Bitcoin and Q3
Despite maintaining a short-term bullish bias, Bitcoin risks correcting lower below the $9,000-support as it heads into the third quarter.
That is because of the cryptocurrency’s historical price action between July and September. Data analytics portal Skew noted earlier on Tuesday that Bitcoin’s rallies end up fizzling in the said period.
#bitcoin had another strong Q2 +42%
Excluding the exceptional 2017 vintage, Q3 has been historically more challenging pic.twitter.com/cm5wm3lfXQ
— skew (@skewdotcom) June 30, 2020
The correction, most likely, could appear because of profit-taking sentiment. If it happens, Bitcoin risks crashing towards $8,600, with its downside targets lurking near $8,000, $7,500, and $6,800.