Bitcoin (BTC) will soon reach the end of a consolidation period, namely a symmetrical triangle pattern, and break either up or down out of it.
This consolidation is the first that has followed last week’s news bombshell news surrounding Bitfinex and Tether. The news sent the entire cryptoasset market down, with altcoins especially hit.
BTC will break up or down from its consolidation, and has already had a deep wick to the downside briefly breaking out of the pattern. There was strong volume on this downside wick, but Bitcoin was defended here and the bulls forced the breakout back up.
The overall trend seems bearish, however. The consolidation is formed off a clear bear pennant, and thus a break down is slightly more likely. What’s more, a break down would probably see the important $5,000 price level broken, which level has been solidly held ever since the April 2 breakout. $5K has already been tested once, during the initial dump last week – and repeated tests of support/resistance (S/R) zones weaken them.
Inversely, a break up would quickly encounter the strong $5,350 S/R zone, which took about three weeks to crack during April. Breaking that level again on a first test, off of a reversal, seems unlikely.
Should BTC break to the downside, we must consider where it may land. The leading crypto has plenty of room to correct down without causing huge damage to the April long term uptrend – and in fact, many analysts had been calling for a deeper correction.
A first target would be the 50 day moving average (MA), green below. This average recent broke through the 200 MA in a “golden cross,” and it would be a good place for a retrace to land. Additionally, the important 0.618 Fibonacci retracement level happens to fall at nearly the same level.
Ultimately, we should not be terribly concerned with a Bitcoin retrace unless price falls below the 200 MA. In fact, we could even welcome such a retrace: both March and April were fantastic months for crypto, and some cooling off before further gains would be normal.
(The views and opinions expressed here do not reflect that of CryptoGlobe.com and do not constitute financial advice. Always do your own research.)