BTC/USD put in a massive breakout last week and so far this week buyers have continued to bid pullbacks, keeping the door open for continuation until something changes.
By : James Stanley, Sr. Strategist
BTC/USD, Bitcoin Talking Points:
- It was a powerful breakout last week and in the time since buyers have largely held the line, showing up at higher-lows to keep the door open for a continuation of the rally.
- I looked at the backdrop opening for bulls on Monday of last week, ahead of the breakout, and as I shared then the timing with moves in gold often diverges and that’s what we’ve seen as gold prices have pulled back while BTC/USD has retained a degree of relative strength.
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Big figures are a big deal in Bitcoin and the 125k resistance from last year illustrates that point well. But – that’s not the only psychological level that’s played a key role in the crypto currency, as it was the 60k defense and the 65k breakout that opened the door for buyers to take a significant step forward, culminating, at least so far, with a resistance test at the 80k level that buyers have yet to be able to break through.
This shows quite well on the weekly chart where some longer-term perspective can highlight key inflection points at these critical price points.
Bitcoin (BTC/USD) Weekly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
Why Are Psychological Levels Important in Bitcoin?
I’m personally a big fan of psychological levels because they make sense. While fundamentals can push trends and positioning ultimately dominates the reason for price movements, human beings think in round numbers and thus, they react and respond to those numbers as they come into play. This is why things like a flat 5k on SPX or 50k on the Dow can play a large role in the matter of price action: Is there anything significantly different at 50,001 from 49,999 other than the level on the ticker? Not really, but because there’s even a possibility for behavioral changes on that basis, it means those levels and prices are of importance.
In Bitcoin, I believe that psychological levels can be perhaps even more important and one big reason is because the age of the market and the background of the participants in it. There’s people holding Bitcoin that have a cost basis below $1,000 and some still below $100. So when we get that first cross of $100k or $125k it can become very appealing to take some profit off the table.
Meanwhile, many new participants aren’t necessarily seasoned traders coming from other markets; it’s people simply looking to join in the cryptocurrency movements and that psychological impact of round numbers can be even more meaningful as $59,999 ‘seems’ much cheaper than just $2 less than $60,001.
But perhaps further to that point – even for a developed market followed by seasoned market professionals, like gold, there can be big reactions at these prices. The $4k level was featured in an article I wrote earlier this morning; it was a big reason I was looking for a bullish move in gold earlier this month as support had just continued to build until, eventually, buyers were able to take that next big step forward.
The big question now in Bitcoin is just how excited bulls remain to be. As discussed in those articles on gold, there’s often a differentiation in themes, even if the assets resemble each other. Like we saw in the summer of 2020 or around the election in 2024, or then again last year ahead of the Jackson Hole Economic Symposium – there’s tended to be a big move in gold followed by calm or range-bound gyration, at which point buying pressure appeared in Bitcoin. Of course, we’re dealing with small sample sizes here but I think the rationale can fit, as gold gets overbought investors look for other ways to place similar types of trades, and given the finite nature of Bitcoin supply, BTC/USD can be an attractive alternative.
At this point that 80k level is still lacking acceptance. The market is heavily overbought on the daily chart, at levels that haven’t been seen since November of 2024. In that instance, prices didn’t automatically reverse as buyers just continued to grind until hitting above $100k shortly after, so this isn’t necessarily a ‘death knell’ for the move but it does highlight the danger of chasing, and the fact that traders could look to approach the matter with patience rather than a fear of missing out in order to catch a pullback and a support test; so, at the very least, risk can be managed proficiently.
Bitcoin (BTC/USD) Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
Bitcoin Structure
While psychological levels are a sensible mechanism of support and resistance for Bitcoin and other markets, it’s not the only permutation that traders can use. In the article published last Monday, ahead of the breakout, the price that I was using was based on a prior support swing, at 62,470 which held a higher low as price re-approached that 65k figure.
Given how quickly the breakout has hit, however, there’s not much for recent price action history, so we can incorporate a tool like Fibonacci to highlight some levels that can soon become usable. This places emphasis on a zone, taking a prior price swing from last March at 76,600, which has already seen a bit of defense with the Monday low, spanned down to the 23.6% retracement which is confluent with last Friday’s low. Ideally, this would be the area that buyers defend in pullback scenarios, but it’s not necessarily ‘game over’ if they don’t as even a pullback to the area around 70k, confluent with the 50% mark of that rally, would keep an open door for bulls to push resumption. And in between the two, it’s the price at 72,270 that stands out as that’s the 38.2% retracement of the move.
Bitcoin (BTC/USD) Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
— written by James Stanley, Senior Market Analyst, Global Macro
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