Bitcoin has staged an impressive uptrend since the end of July, after enduring a brutal dip in the months prior. September started on a high note for bulls as the coin soared above the $50,000 mark for the first time in the last three months. Historically, September has been a difficult month for the coin, but this may well be the year that history is rewritten. 

Bitcoin’s market data

Since 2014, every year without fail, September has been a month for the bears on the Bitcoin market. In 2020, when the Covid-19 pandemic engulfed the world in a state of uncertainty, naturally, the coin’s price fell for most of the year. However, after September, it staged an impressive recovery, which started a prolonged bull run culminating in a new all-time high (ATH) of above $64,000 in April of 2021.

Despite the ongoing pandemic in 2021, Bitcoin has managed to grow its market capitalization by 386.5% over the past year to a whopping $942.39 billion.  This is still the year that Elon Musk, Tesla’s CEO, accepted Bitcoin as a payment method for Tesla. Paul Tudor Jones, the billionaire famed for predicting the 2007-2008 financial crisis, is openly rooted for going all-in on the cryptocurrency, especially given the Fed’s dovish stance on monetary policy. 

More recently, El Salvador passed a law recognizing Bitcoin as legal tender within their borders. This law goes into effect on September 7th. The government will be launching Bitcoin ATMs that allow its citizens to convert the token into US dollars. In addition, they’re offering every citizen $30 worth of Bitcoin, which will definitely increase the coin’s popularity.  

The El Salvador news has set social media abuzz. Users on Twitter and Reddit have started a movement to buy the coin en masse in support of the legislation. This movement is likely to drive investor confidence in cryptocurrency. 

Some analysts believe we may see the coin reach a $100,000 ATH by the end of the year. Other skeptical analysts believe the coin is set to plummet to sub $30,000. Let’s analyze the coin’s most likely future trend using two of the most common indicators in the market. 

1. The Exponential Moving Average

The EMA, like the Simple Moving Average indicator, tracks a commodity’s price movements over time. In essence, it is a Weighted Moving Average indicator that gives more weight to the most recent data. This way, it surpasses these other Moving Averages by having increased sensitivity to recent price movements.  

How it’s calculated

To obtain the EMA, first, you need to calculate the SMA, which acts as your initial EMA. For a 20-period length; 

SMA= (Sum of all closing prices in the period)/20.

Then, you need to obtain a multiplier as follows;

Multiplier= 2/(time periods +1)= 2/(20+1)=0.0952=9.52%

With these, the formula for EMA becomes;

EMA= {Today’s close-EMA(yesterday)}*multiplier + EMA(yesterday).

If you’re having trouble following the math, worry not. Most charting platforms will take care of the calculations for you. 

Using EMA to generate signals

This indicator can be used to predict price trends through crossover patterns. To achieve this, you need two EMAs, one moving faster than the other. The recommended periods for this strategy are 50 and 25-period Moving Averages.

Conventionally, when the shorter period Moving Average crosses below, the longer MA, it forms a bearish crossover pattern. The inverse is true: the shorter Moving Average crossing above the longer MA yields a bullish crossover signal.  

A three-hour BTC/USD chart.

In the three-hour BTC/USD chart above, we see a bullish crossover pattern form between the two EMAs. Further, prices seem to be using the two Moving Averages to provide them support as they rally further, indicating that a continuation of the bullish trend is likely.

2. The MACD

The Moving Average convergence divergence is another indicator that compares two EMAs to track price movements. It is calculated by subtracting the 26 period EMA from the shorter 12-period MA. This result is plotted on a line that is dubbed the MACD line.

A 9-period EMA is then plotted on top of the MACD line. This line is dubbed the signal line. This line is used in conjunction with the MACD line to generate trend change signals. These signals could come in the form of crossovers, instantaneous rises or falls, or divergences.

The MACD often comes with a histogram. This histogram measures the distance between the MACD and the signal line. When the MACD is above the signal line, prices usually trend upwards, and the histogram records positive values. The height of the histogram bars is directly proportional to the buying momentum in the market.

Conversely, when the MACD goes below the signal line, prices are usually in a downtrend. The histogram records negative values, and the height of its bars represents the strength of the bears’ momentum in the market. 

BTC/USD three-hour chart

From the 3-hour BTC/USD chart above, the blue MACD line crossed above the signal line at the beginning of September – a bullish signal. As the month progressed, the price rose from $47,335 to the important resistance level of $50,000. Here it consolidated as bears tried to drive the prices down. As is evident from the MACD, their momentum faded, and shortly after, the bulls were back in charge.

Though the MACD line is currently above the signal line, bullish momentum is waning. This is because prices are still close to the vital $50,000 resistance. If the pair’s price manages to rally above this level, the bullish trend will likely continue. 

3. Fibonacci retracements

To obtain possible future resistance and support, let’s turn to Fibonacci retracements.

3-hour BTC/USD chart showing Fibonacci retracements.

The Fibonacci retracements clearly highlight the important resistance at $50,000, at the 23.6% retracement level. If BTC breaks out of this level to continue its bullish run, the next level to watch will be the prior resistance level at $60,000. However, if the resistance holds and prices fall, the next support will likely be at $41,492, the 38.2% Fibonacci retracement level.

Conclusion

BTC is currently on a bullish run, and our indicator-generated signals point to a continuation of the trend. The remainder of the year should be a bull market, and the coin is very likely going to hit the $60,000 mark. However, a move below $50,000 will invalidate this trend.