Last week started off with bearish readings in key indicators and saw the price of bitcoin fall below its 50-week EMA. The indicators turned bullish mid-week and a divergence formed across the 50, 100 and 200 day EMAs. The end result: a nearly 25% increase in price, peaking around a 21-month high of $550 on most major exchanges.
Three Drivers of Bitcoin’s Price Increase
In our previous Bitcoin Price Outlook, we wrote that significant buying pressure would be needed to break through strong upside resistance in the $460 range. That came to fruition last week as upside volume reached its highest levels since early-November 2015 when the price briefly spiked above $500 (see chart above).
Chinese traders were a major driver of this price jump. The yuan continued its devaluation against the US dollar and talks of onshore capital controls started up again.
DAO & Ether
The price of DAO fell below the price of Ether which may have triggered traders to cash out of both digital assets into bitcoin. Traders should continue to watch the correlation between the ether and bitcoin markets going forward.
Bitcoin Price Outlook for the Week Ahead
Following Bitcoin’s massive move last week, short-term support now sits at $530 and $520 with the $500 area now a key zone to watch. On the upside, clearing $570 overhead could lead to a test of $600.
Traders should expect some of the recent gains to be consolidated and the price to form additional support levels, before moving higher. Volatility has returned in a big way and large price movements could be on the horizon. All key indicators remain bullish.
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*All data and references are current as of 4:00PM EST on 5/16/2016.