After the recent rally, some have turned positive and have projected a new high within the next few months. Prominent among them are Galaxy Digital CEO Michael Novogratz, and investment bank Canaccord Genuity, both have a target of $20,000 by 2021. Tim Draper, however, believes that Bitcoin can reach $250,000 by 2023. While these targets boost sentiment, we believe that the cryptocurrencies will face many hurdles before they make a new high.
The sharp rally in Bitcoin has boosted its market dominance to 58.8%, its best level since December 2017. This shows that the market participants are currently favoring the largest digital currency over altcoins. But if Bitcoin sustains close to current levels, we expect the altcoins to play catch up in the near future.
We had expected Bitcoin to breakout of the overhead resistance and extend its rally but the pace of rise has surprised us. This is reminiscent of the rally seen during the previous bull market. However, we believe that the cryptocurrency is unlikely to continue this parabolic move. It might hit a roadblock closer to $7,500 and enter into a correction or a consolidation for a few days.
Any pullback will find support at $6,000. This had acted as a major support previously, hence, we expect the bulls to defend it one again during the next correction. If this support holds, it will increase the probability of a new sustained uptrend and will act as a new floor.
But if the support fails to hold, the digital currency can plummet to $4,780. If the price stays below $6,000, it will indicate weakness. On the other hand, if the price continues to move up, the levels to watch on the upside are $8,500 and above it $10,000.
Ether broke out of the ascending triangle pattern on April 02. Thereafter, the bears attempted to sink the digital currency back into the triangle, but it found support closer to the 50-day SMA. The bulls again pushed the price back above $160, which showed buying at lower levels. The pattern target of the breakout of the triangle is $239.1.
Currently, the cryptocurrency is trading inside an ascending channel. The bears are attempting to defend the resistance line of the channel. Any pullback from the current levels will find support at the moving averages and below it at the support line of the channel.
The digital currency remains in an uptrend as long as it trades inside the channel. A breakdown of the channel and $160 level will be an indication that the bulls are losing their grip. On the other hand, if the bulls propel the price above the channel, Ether might quickly rise to its pattern target and above it to $255. Traders who had initiated long position on our earlier proposal can raise their stops to $155.
Litecoin is close to the critical level of $94.50. A breakout and close (UTC time) of this resistance will complete a bullish rounding bottom that has a target objective of $165.87. Therefore, we retain our buy recommendation given in the previous analysis.
The 20-day EMA, which was flattening out has started to trend up once again and the RSI is close to the overbought level. This shows that the bulls are back in command. The only bearish sign is the developing negative divergence on the RSI.
Our bullish view will be invalidated if the bulls fail to arrest the decline at the moving averages. The cryptocurrency will turn negative on a breakdown of $65.