Bitcoin has displayed indications of a potential reversal recently, as it has charted three consecutive green daily candles. The last time such a pattern was observed was early July and between mid and late June, when Bitcoin rallied from just under $25,000 to over $31,000. This shift in price dynamics has led to a change in market sentiment, with a more bullish perspective replacing the previous bearish outlook. Bitcoin's Double Bottom Formation: What's Next?
Although Bitcoin has avoided the confirmation of a double top on the 1-week chart for the time being, this price action has sparked discussions among analysts about the possibility of Bitcoin forming a double bottom pattern, which is a significant technical indicator.
🌎《Now you can now start trading at TNNS PROX》📈
🔥Start trading today, click "sign up" from the link above.
Bitcoin's Double Bottom Formation: What's Next?
The double bottom is a technical analysis pattern that can indicate a potential trend reversal from bearish to bullish in markets. This pattern is characterized by two lows in the price chart, separated by a peak or a minor high in between. The first trough indicates a significant low, followed by a temporary rebound, and then a second trough usually near the same price level as the first. To confirm a valid double bottom, the price needs to break above the peak or resistance level between the two troughs, signaling a potential upward trend reversal.
Rekt Capital, a well-known crypto analyst, recently shared insights suggesting that Bitcoin's current price pattern in the weekly chart resembles a double top, which typically indicates a bearish reversal. This pattern is characterized by an 'M' shape. However, for this pattern to be confirmed, the price would need to break down from the $26,000 support. At the moment, Bitcoin is trading at $26,618, successfully fending off the double top validation.
On the other hand, a double bottom, which forms a 'W' shape, would require Bitcoin to rebound from the $26,000 mark. Rekt Capital tweeted today that "Could this BTC Double Top actually be a Double Bottom? And the simple answer is - technically, yes. [...] But for BTC to form a Double Bottom, it would need to rebound from $26k and rally to $30.6k (which is its validation point)."
Bitcoin is facing various challenges, including uncertainty surrounding the $26k support level and multiple resistances ahead. The completion of the double bottom formation may be hindered by these challenges. The $26,000 level is significant, and BTC may be choosing the "relief rally" route to turn old support into new resistance. The black monthly level (~$27,200) is approximately confluent with the bull market support band. Bitcoin's recent bearish monthly candle close for August confirms that it has lost support at approximately $27,150. Therefore, the current price move by Bitcoin could only be a relief rally to confirm $27,150 as new resistance before dropping into the $23,000 region. It is possible that BTC could rebound into ~$27,150, maybe even upside wick beyond it this September. $23,000 is the next significant monthly support level now that ~$27,150 has been lost.
More Resistance Levels For BTC Price
Bitcoin (BTC) is currently facing a major resistance level of $27,150, which needs to be broken before the bulls can confirm a double bottom pattern. However, there are other key resistances to overcome before the price can breach $30,600 and confirm the double bottom pattern.
On-chain analysis firm CryptoQuant has highlighted the importance of short-term Bitcoin holders, who often provide liquidity for significant price movements. According to their data, the break-even price for these holders lies between $27,500 and $29,000. If Bitcoin remains below these levels for a prolonged period, these holders may be incentivized to sell, which could potentially exert downward pressure on the price.
The more time we spend below these price levels, the more incentive there will be to exit liquidity from the market, and the basis condition for the return of the upward trend of Bitcoin depends on the price jump above the short-term realized prices.
BTC is facing three significant resistances on the 4-hour time frame. These resistances are located at $26,857 (38.2% Fibonacci retracement level), $27,365 (23.6% Fibonacci retracement level), and $28,186 (post-Grayscale high from August 29th).
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Comments