If Bitcoin’s price does begin climbing as this data suggests, it is important that it decisively breaks through its next resistance levels, which one analyst believes currently exists around $5,000.
Joshua Frank, the cofounder of cryptocurrency analytics platform TheTIE.io, spoke to Forbes about the data regarding the growingly bullish sentiment surrounding Bitcoin, referencing a sentiment score that uses data from social media.
“We saw that daily sentiment peaked on January 4th, and while it has fallen slightly, it has remained positive. Given the historic correlation between bitcoin sentiment and price, this would suggest further gains for the cryptocurrency,” Frank explained.
Frank’s comments regarding the sentiment data are reflected by one widely used technical indicator that just recently turned positive for the first time in months.
The Directional Movement Index (DMI), which measures the strength of the buying or selling pressure behind a particular asset, moved into the positive directional movement category for Bitcoin, signaling that it could be facing growing buying pressure that could spark a rally in the coming days or weeks.
Although there are multiple signs pointing to a growing bullish momentum behind Bitcoin, one analyst claims that it is likely caught in a wide trading range, with $5,000 remaining as a strong level of resistance.
Mati Greenspan, the senior market analyst at eToro, recently discussed this range, also noting that the $4,000 price level that Bitcoin is currently defending is not psychologically important.
“Even though $4,000 is a nice round number it doesn’t necessarily represent any sort of significant psychological level. If we zoom out, and as we’ve been discussing for a few weeks now, we can see that the overall range that we’re in is from $3,000 to $5,000 per coin…So we’re now at the halfway mark in the middle of the broader range,” he said.
Jon Pearlstone, the publisher of the CryptoPatterns newsletter, has a slightly different view of where the key resistance levels are, claiming that Bitcoin must break above its 2018 trend line that exists at $4,500 in order for it to test the next key resistance level at $6,000.
“Any strength on a test of the trendline would likely lead to a retest of key resistance at the $6000, a level that held for months,” Pearlstone explained.
Since Bitcoin climbed above $4,000 a couple of days ago, it appears to have treated this price as a level of relative support, but it must gain greater buying pressure in order to surge to its next key levels of resistance.