Bitcoin Price Support Line Chart: How To Read the Market’s Bottom Resistance Levels?
What do Charts Say About Bitcoin and its Price?
During the last year, we have seen how Bitcoin moved from $20,000 down to $6,000 dollars. If we take a look at the chart, Bitcoin has hit the same support line already four times this year. The number goes to five if we take November 2017.
For readers to understand, ‘support lines’ are psychological levels created by people that are waiting for bottoms in the market. That means that it is harder for a specific financial instrument to break down a previous bottom than bouncing up from it. That means that a support is a potential rallying point for that asset.
At the same time, we find other lines that indicate resistance levels. The same thing happens here with the asset, but the difference is that resistance levels are certain prices that work as barriers for the value to keep growing. The opposite to support lines.
It is important to mark that lines of support or resistance represent a natural equilibrium point that work as ‘the right price’ in certain circumstances. Once it is traded close to that point, there are some circumstances that change the trend of the market in this specific moment.
Some skeptics believe that support and resistance levels do not really exist and that they are just a trick of the mind. The human brain is always trying to spot patterns even when we are talking about random events.
However, it is very important to stick around simple signals in the market, because they can be extremely useful.
According to Clem Chambers, from Intelligent Investing, it is better to see forks in the road:
“Rather than see fate in charts I prefer to see forks in the road. For example, if bitcoin breaks down from these levels I may well see my $2,500 levels or at the very least another — and in my thesis last — leg down for bitcoin to base from which the next boom will come.”
At the moment, he says that he is interested in four key levels: $6,000, $3,500, $2,500, $1,000.
He says that he would not be convinced about a new rally if the market does not experience a new big drop. If the support level that we have now at $6,000 dollars is broken, then he believes the price of the famous virtual currency could drop until the next support level at $3,500 dollars.
At the moment, Bitcoin is being traded around $6,350 dollars and has a market capitalization of $109 billion dollars. The next days will be key to see what will happen in the cryptocurrency world.