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."