(Bloomberg) — Bitcoin’s surge over the past week got a lot of hearts pumping. Now technical indicators suggest enthusiasts could see it make another major move higher soon.
Based on its recent price trend, Bitcoin appears to be consolidating before its next jump, which could take it back to $12,000, a resistance level dating back to last August. In addition, the coin is in overbought territory, according to its 14-day Relative Strength Index (RSI), which measures the magnitude and persistence of price movement.
And another technical gauge suggests Bitcoin could move higher. Based on the Trading Envelope indicator, which smooths moving averages to map out higher and lower limits, the token’s price is below the upper limit of the band, typically seen as a positive development.
“The break above $10,000 is very compelling and should lead Bitcoin higher,” said Matt Maley, chief market strategist for Miller Tabak + Co. But in the near term, it’s overbought and needs to take a breather, he said. “It might be able to work off this condition with a sideways correction, but its upside potential is limited over the next week or two.”
Bitcoin last week rallied and as recently as Monday traded above $12,000, its highest level in about a year. But, amid heightened volatility, it posted a steep drop shortly after crossing that threshold, with some analysts positing that investors saw the rise as an opportunity to take profits.
“The volatility we’ve seen the last couple of weeks is just a reminder of what this asset class is capable of,” said Craig Erlam, senior market analyst at Oanda. “It’s still a relatively immature instrument and flash moves shouldn’t surprise us.” The important thing, however, is that it has broken above $10,000 and a weaker dollar could be aiding it, he said. “This could leave it open to further gains and surges in volatility in the months ahead.”
Bitcoin fell as much as 3.2% Tuesday to around $11,000. Other major cryptocurrencies also retreated, with the Bloomberg Galaxy Crypto Index losing nearly 5%.
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