The Bitcoin price action on the weekly time frame is looking bullish.
If this pattern plays out, we are in for a crazy ride up. A cup and handle pattern is a very bullish pattern when it plays out. The target for such a pattern, as drawn on the chart above, is basically the height of the cup. If price does break out of the handle the 'technical' target would be in the US$ 120,000 range.
It is important to note a few factors:
This is on the weekly chart. Even if a successful breakout occurs this is not going to hit its target in just a few weeks, this is a longer term play, most likely a number of months; and
The probability of such a pattern although being greater than 50% still carries relatively high risk of failure in this instance as this is a deep cup. Probability of reaching that target is for time to tell.
Bitcoin has had an extraordinary performance this last year, having managed to take out the previous cycle high of US$ 69,000 before the Bitcoin halving. Historically, this asset has not made a new high until after the halving. However, with the approval of the Bitcoin ETFs there has certainly been an enormous growth in demand for this asset with institutions gobbling up a tremendous amount of Bitcoin. Undoubtedly this has caused this sharp and quick rise earlier than expected. Is it too quick?
Even if this trading pattern doesn't play out, it is clear that the price action has for the last couple of months been consolidating in a relatively tight range, which certainly adds fuel to the train of thought idea that there is more likely than not going to be a continuation to the upside. Stock markets have been performing well and given the relative correlation of Bitcoin with the stock market, the stars are certainly aligning.
To take a bearish view when the price action is as it is now doesn't seem sensible but with markets always humbling it's participants, a counter view certainly merits being reviewed. When we look at previous cycles Bitcoin has normally had a sizeable pull back before the halving and we should be conscious that it is possible that a shake out of weak hands with a 30% or so pull back in price is not an unreasonable possibility. If this does happen I would certainly be looking to take a trading position in addition to adding more to my long term position.
I am sure many of us are excited to watch how the price action plays out. For all of us that hold a Bitcoin position, either for short to medium trading or as a long term investment, let us patiently wait to see if the current pattern does play out.
If trading this particular pattern, whatever you do, wait for a confirmation before you consider entering a trade, due to Bitcoin's volatility.
Trade Clearly!
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