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Bitcoin breaks above key $8,000 level but it’s not out of the woods yet, technical analysts say

Key Points
  • Based on past behavior another pullback could be coming for bitcoin, according to some technical analysts.
  • Bitcoin jumped above $8,000 to a two-month high Tuesday, shaking off bearish sentiment that has persisted since the start of summer.
  • “Given that it has trended down so sharply since May, I wouldn’t want to get too greedy,” says Newton Advisor founder and analyst Mark Newton.  
A Bitcoin conference in New York.
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Bitcoin shook off a bearish two months after rising above $8,000 Tuesday but based on past behavior, another pullback could be coming, according to technical analysts that cover cryptocurrency.

“Given that it has trended down so sharply since May, I wouldn’t want to get too greedy,” said Newton Advisor founder and analyst Mark Newton. “Looking at cycles near term, this doesn't mean it will go back to its highs right away. "

Newton said he would still “wait and see " if bitcoin can recover based on the digital currency's behavior in the past month. Bitcoin had struggled to break above $7,000 until last week, and traded in the $6,000 range for most of July. It has fallen roughly 50 percent this year, and down 60 percent from its highs near $20,000 in December, according to data from CoinDesk.

Analysts at Fundstrat are watching the 15-day daily moving average, often a proxy for longer-term trends, which has been trending positively for bitcoin.

But the analysts agreed that some short-term indicators are overbought, which often signals a price pullback. Still, the firm expects any drop to be "relatively shallow,” according to technical strategist Rob Sluymer.

“Incrementally, it’s positive action as the May-July downtrend has been reversed,” said Sluymer, who is also a managing director at Fundstrat.

Despite bitcoin's slump in 2018, the firm is hanging on to its $25,000 year-end price target. Fundstrat Managing Director and Head of Research Tom Lee said this week's 20 percent jump signals a return of bullish sentiment.

“A month ago, bitcoin was seen as broken, about to be regulated out of existence, and bubble with downside of $3,000,” said Lee, who was formerly JPMorgan Chase's chief U.S. equity strategist. “The trajectory of the Bitcoin’s narrative has inflected.”

While $8,000 was an important move, last week’s rise above $7,800 was even more significant, according to eToro Senior Market Analyst Mati Greenspan.

“Once that was broken, $8,000 followed pretty easily,” Greenspan said. “If we can sustain above $7,800, that would be really bullish and would go a long way to impacting sentiment.”

The next level of resistance is $10,000, but even getting to $9,500 from $8,000 could be difficult, Greenspan said.

Investors had a few reasons to be optimistic this week. Bitcoin began climbing above $7,000 last week following news that BlackRock confirmed it assembled a working group to look into cryptocurrencies and its underlying technology, blockchain. Anticipation of a bitcoin ETF decision by the Securities and Exchange Commission in August has also been a source of enthusiasm for buyers.

For now, Mark Newton is anticipating 5 to 10 percent dips and waiting for the fall for a meaningful price rise in bitcoin.

"We'll see a pullback in August," he said. "Historically, you wanted to be invested in November and December."