Bitcoin's 3-Week Consolidation Under $38K Has Bullish Undertone
The pullbacks have become less deep over the past three weeks, suggesting the building up of bullish sentiment, one observer said.
Bitcoin's (BTC) price rally has stalled since Nov. 9, with $38,000 proving a tough nut to crack. That does not necessarily mean the uptrend is over.
In fact, a closer look at how prices have behaved during the consolidation suggests it isn't.
While the gains have been capped closer to $38,000, the subsequent pullbacks have been shallow and short-lived, a sign of persistent "buy-the-dip" demand within the price consolidation. The horizontal upper bound of resistance and rising lower bound from shallow dips can be identified as an ascending triangle formation on the price chart.
In other words, bitcoin could be building energy for the next leg higher.
"Bitcoin bounces around in an ascending channel, hitting its three-week upper resistance of $37.8K on Wednesday evening. An intensifying sell-off thwarts attempts to heat the price, but the pullbacks have become less deep over the past three weeks, suggesting the building up of bullish sentiment," Alex Kuptsikevich, a senior market analyst at FxPro, said in an email
Ascending triangles mostly end with a bullish breakout, extending the preceding uptrend, according to chartered market technician Charles D. Kirkpatrick II and technical analyst Julie R. Dahlquist's book "Technical Analysis: The Complete Resource for Financial Market Technicians 3rd Edition." The book focuses on traditional markets.
"Upward breakouts occur 77% of the time, and breakouts happen roughly 61% of the distance (time) from the base to the cradle," Kirkpatrick II and Dahlquist say in the book while warning of the potential for failed breakouts. A fake breakout happens when prices move beyond the resistance, only to fall back into the pattern quickly, trapping buyers on the wrong side of the market.
