Bitcoin Technical Analysis 30 June 2021 (month end analysis)
Today is the last day of June, which means that bitcoin is about to close a monthly candle. This will provide us with an opportunity to go into some longer-term analysis of the bitcoin price.
This way, we can try to answer the question on everyone’s mind: Is bitcoin going into a sustained bear market or not?
To help with this analysis, we will also examine the bitcoin weekly chart, and the weekly and monthly charts of the US dollar index (DXY).
But before we get to that, let’s first start with the bitcoin daily chart to see what is potentially on the cards as we head into July.
Bitcoin 1-day chart:
We can see several things on the daily chart that look good. We covered these on Monday’s analysis. We could see a continued bounce on the daily chart, provided certain conditions are met:
- Bitcoin has broken out of a “messy” descending triangle pattern: bitcoin is currently retesting this line. If it can turn this into support (unlike the previous time we broke it), that would be a good sign for the bulls to continue towards the $40K region (top of the range).
- As discussed on Monday, we wanted to see bitcoin close daily candles back above the 21-day exponential moving average (EMA, yellow line). We have seen this happen. A close above this line at the end of today would signal continued strength. But if we start to close daily candles back below this line, then we are likely to retest the range lows of ~$30K.
- If we continue to stay above the 21-EMA (yellow line), the EMA will start to turn up in slope. A bullish cross of the 21-day EMA and the 50-day simple moving average (SMA, blue line) would then become more likely. In the past, this has often resulted in larger upside moves. But if the slope continues downwards and we don’t get the cross, the bullish onslaught is likely to continue.
- Bitcoin has formed a valid W bottom on the daily chart. Notably, the second bottom was a “relative higher low” as it happened inside the bottom Bollinger Band. With that said, the width of the Bollinger Bands was not also contracting at the time of the second low of the W pattern. It would have been better for the bulls if it had, as this would have signalled a slowing downtrend with decreasing volatility. However, we still have a relatively higher low on the daily chart. You can read this article on Bollinger Bands for a more detailed explanation of how Bollinger Bands can be used to help validate W patterns.
- The daily MACD is still showing momentum to the upside for bitcoin. Until this starts to slow down, we are still bullish for a continued swing high.
- The RSI is still above the downward sloping trendline after retesting it. This means that the relative strength of buyers versus sellers is becoming more pronounced.
Bitcoin monthly charts:
Let’s now look at 2 bitcoin monthly charts. As it stands, each of these suggests that a longer-term bear market is more likely.
We will close the month inside the top Bollinger Band:
From the above chart, we can see that bitcoin is about to close a full monthly candle body inside the top Bollinger Band. Of course, the day is not done yet but it is very unlikely we will close at all-time highs today!
Apart from the 2013/2014 “double peak cycle”, this resulted in a severe bear markets for bitcoin.
The Monthly RSI is also showing bearish signs:
In all past bitcoin bull markets, the monthly RSI was in “overbought” territory (above 70) towards the final stages of the bull run. Apart from the double peak cycle in 2013/2014, we have had bear markets after returning below 70 on the RSI.
Bitcoin weekly charts:
Zooming into the bitcoin weekly charts, we have two things that suggest more downside potential:
The 21-day EMA is well known for separating bitcoin bull and bear markets. You can read more about this here. Currently, we are below the 21-week EMA. Apart from the 2013/2014 double peak cycle, this was followed by major bear markets.
There is also something bearish on the weekly MACD:
US Dollar chart:
Bitcoin is priced in US dollars. Therefore, a weakening dollar is usually good for bitcoin and a strengthening dollar is usually bad. The DXY index also usually rallies when global markets become more uncertain. We saw this in the 2008 stock market crash and during the Corona crash of 2020.
The chart below shows the inverse relationship between the bitcoin price and the DXY:
If the dollar now gets stronger and the DXY goes up, it is possible that bitcoin would continue trending down. So the question is, what is the dollar likely to do next?
From the below chart, we can see that the US dollar has formed a W bottom reversal pattern, with the second low inside the bottom Bollinger Band. This suggests that the dollar could continue higher for a bit:
In the next chart, we can also see that the DXY is testing multi-year support. If this support holds, the dollar is likely to rally over the next couple of years towards the top of the trendline. If this happens, I don’t think that would be good for “risk-on” assets in general. And bitcoin is a risk-on asset.
Of course, the dollar is still in a major downtrend. So, if we don’t hold support, that could be good for bitcoin.
The charts suggest Bitcoin could go up in July – perhaps to the top side of the range (~$40K). But even then, the road back towards all-time highs is paved with deadly resistance.
Unless things change, the monthly and weekly charts don’t look great in my opinion, and suggest a more sustained bear market is more likely from here. With that said, this would be completely normal and healthy for bitcoin and does not deter from the long-term bullish fundamental case for owning it.
There is always the possibility for a “double peak” cycle like we had in 2013/2014. Also, since bitcoin has only been around for 12 years, we don’t have much history to go by.
Bitcoin moves fast, and a lot can happen between now and next month.
Disclaimer: This is not investment advice, it is just my opinion on the bitcoin chart right now. I can and will be wrong because markets are not predicatble. My opinion can and will change depending on what the chart does next.