Bitcoin has recovered from a bad week and is now back above $8,000. However, decent trading volumes, according to technical charts, do not support the rally.
Bitcoin closed below technical levels on Thursday, indicating a bearish breakdown. However, the sell-off suddenly lost steam a day later at $7,925. Bitcoin then gained more than $500 over the weekend, pushing above resistance at the 50-day moving average.
As of this writing, BTC is trading at around $8,230, after struggling to stay up above $8,500 this week.
Although last week’s bearish trend appears to have lost steam, the weekend’s low-volume rally threatens to trap the bulls on the wrong side of the market.
As a result, the chances of bitcoin rallying up to $9,000 this week is pretty high. But, the bullish case drastically weakens if we consider the data for trading volume.
Volume is a very important indicator as it shows the amount of interest people have on bitcoin. A rally that is supported by high volumes means greater reliance can be expected on the bullish move. On the other hand, a low-volume rally ends up becoming a bull trap.
In bitcoin’s case, its trading volume on Bitfinex continues to go down and more notably remains low alongside price action. Also, trading volume throughout all exchanges dropped below $5 billion during the weekend—the lowest ever recorded since April 11.
This places the rally witnessed over the weekend into question.