A near-perfect Doji appeared on the Bitcoin daily chart on Tuesday following its 24 percent upside rally in the previous session, pointing to a potential trend reversal ahead.
The BTC/USD exchange rate painted a long-legged candlestick that roughly had the same opening and closing rate. Analysts perceive it as a sign of indecision on the sides of both sellers and buyers. The technical standoff between bulls and bears typically leads to a price reversal.
For instance, if the trend before the Doji formation was bullish, it switches to bearish. And vice versa.
Bitcoin climbed to its record high above $48,000 on Tuesday after Tesla revealed that it had bought $1.5 billion of the cryptocurrency in January.
Bulls took the news as another signal of Bitcoin’s adoption on Wall Street, especially after MicroStrategy, a Nasdaq-listed software firm, extended its Bitcoin reserves to 71,079 BTC, which are now worth more than $3.3 billion. An RBC analyst anticipated that the next corporate house in line to invest in Bitcoin could be Apple.
…the euphoria subsided after a flurry of warnings against Tesla’s Bitcoin investment. For instance, JPMorgan & Chase strategists noted that other corporate treasuries might find it difficult to exchange their cash reserves for Bitcoin because of the latter’s underlying price volatility.
Meanwhile, Campbell Harvey, a professor at Duke University in Durham, North Carolina, said Bitcoin wouldn’t provide Tesla the hedge they seek against dollar devaluation and inflation.
“That to me is OK if you are a hedge fund and your clients know that this is exactly what you do, you make speculative bets and sometimes they work and sometimes they do not . . . Tesla is not a hedge fund,” he told the Financial Times.
Treasury Partners’ Managing Director Jerry Klein also added no case for corporates to replace their stable cash reserves with a risky asset such as Bitcoin, noting that Tesla’s move makes no sense.
“Corporations invest their cash in very high quality, short-term fixed-income securities and are willing to accept a relatively low rate of return,” he said.
What’s Next for Bitcoin?
Bitcoin was trading modestly higher on Wednesday, but its bias conflict remains intact near the record high, especially after forming Doji.
A correction from here expects to land the price near its 20-day exponential moving average (the green wave), which sits near $40,000. Meanwhile, a jump expects to take BTC/USD towards $50,000, a new historic peak altogether.