Bitcoin is finally ready for a rally over $4000

Bitcoin (BTC) bulls are finally ready to give the market direction. Until recently, both the bulls and bears were confused who is in control of the market. The bears expect the price to decrease, but they expect a rally past $4,000 first. The bull majority are convinced that BTC/USD has already bottomed and the price is only going to rise from current levels. The daily chart for BTCUSDShorts shows that the number of margined shorts has once again declined to a critical support. If this support is broken, it is likely that the next support will be broken too and BTCUSDShorts will fall down all the way towards its support at 8,777. This fall in the number of shorts will be fast and so will be the corresponding rally in BTC/USD.

When BTC/USD experienced a flash crash last week, the majority of Bitcoin (BTC) bulls were scared, which is why the price has been trading sideways for such long time. A lot of Bitcoin (BTC) bulls believe the price has already formed a bottom, but they are not prepared to step in until they see a strong rally to the upside. The next rally past $4,000 will be the signal that the bulls need to get onboard. The majority will take it as a signal of bullish reversal when it could be a fake one and will lead to major liquidations in the days ahead that will lead to another flash crash soon after that.

The reason we believe BTC/USD will fall sharply after the quick rally past $4,000 is because the price is already trading under overbought conditions on the weekly time frame. The daily chart for BTC/USD shows that the price is currently resting atop the 61.8% Fib extension level and is prepared for a rally towards $4,200 which could extend towards $4,500. The strong rally in BTC/USD is expected towards the end of this week.

The daily trading volume is also in a steady decline and any move to up or down is going to be abrupt. When the volume is this low we can expect the price to trade without a defined direction for a long period of time, but make quick unexpected moves every now and then. This rally to the upside is going to be no different than the crash we saw last week.

Chart: TradingView.com

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