Bitcoin’s (BTC) recent rebound from below $ 30,000 has increased its chances of extending its retracement move upwards, at least following a classic technical pattern.
The megaphone-shaped pattern is known as the broadening formation and appears when price moves within two diverging trend lines. Investopedia states that a widening formation represents a disagreement about the next potential bias among investors. As a result, the price forms higher intermediate highs and lower intermediate lows.
Bitcoin appears to trade within a similar structure as shown in the graphic below. Still, the cryptocurrency lacks volatility, one of the key features of the expanding formation pattern.
Stabilized Bollinger Bands reflect the limited price volatility in the Bitcoin market. Source: TradingView.com
Should the pattern show, Bitcoin price will see a bullish breakout above the structure’s upper trendline.
In doing so, he would expect it to rise to the maximum height between the upper and lower trend lines of the broadening formation. The upside setup appears because traders interpret the expanding formation as a trend reversal pattern.
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But until then, the pattern provides day traders with swing trading opportunities, that is, an upswing from the lower trendline tends to offer long opportunities towards the upper trendline, and a retreat from the upper trendline could encourage traders to short towards the lower to open.
Again, the volatility of the Bitcoin price is lower enough to invalidate such intra-range setups.
Falling channel
The preliminary resistance level is near the dashed trend line on the Bitcoin chart below.
The setup of the falling Bitcoin channel limits the upside prospects of the bullish expansion pattern. Source: TradingView.com
A close above the dashed trendline expects Bitcoin to test USD 35.00 as the next resistance target. With a longer upward surge, the potential to hit $ 40,000 is higher based on recent cryptocurrency price patterns.
Conversely, a pullback from the dashed trendline tends to confirm a falling channel pattern. On the flip side, Bitcoin could retrace its steps towards the broadening wedge support trendline (next downside target near $ 28,500).
Bitcoin Price Basics
The conflicting Bitcoin setups arise when bulls continue to defend $ 30,000 as support while bears enjoy control of the $ 34,000 to $ 35,000 range. Unfortunately, this has put the BTC price in a constrained trading range, which doesn’t give any preliminary indication of where it might want to go next.
Fundamentals have played a key role in containing bitcoin prices. On the flip side, inflationary pressures from the traditional financial sector have given tailwinds to the Bitcoin safe haven narrative. The downside, meanwhile, is an increasingly global regulatory dissatisfaction with the cryptocurrency sector.
Related: SEC Chairman Says Cryptocurrency Comes Under Security-Based Swaps Rules
In the past two months, the market has seen China banning cryptocurrency trading, India raiding the regional crypto exchange WazirX, and the UK banning Binance’s subsidiary from operating regulated businesses. In addition, Japan and Hong Kong also issued warnings and restrictions against Binance.
Earlier this week, US state authorities shut down the accounts of crypto firm BlockFi, claiming the startup sold unregistered securities. The sector also received criticism for increasing its carbon footprint from mining, which requires heavy computing power to run blockchains.
“Unless global cryptocurrency regulation is relaxed or a solution is found, I believe it will be difficult to gain public trust and Bitcoin to reach the heights it reached in early 2021,” said Adam Todd, Founder and CEO of Digitex said Cointelegraph.
JG Collins, director of Stuyvesant Square Consultancy, also wrote in his op-ed Seeking Alpha that “national economic regulators, state environmental regulators and communities troubled by” mining “and raising local electricity tariffs will sweep cryptos away like a tsunami”.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.
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