Over the last month, bitcoin has seen large swings in price as the bulls scramble to call the bottom and the bears scramble to call the top of the market. The market saw a 50% retracement a few weeks ago, leading the bullish investors to “buy the dip” only to see it quickly top out and retrace again. Volatility is no stranger to bitcoin and the swings have been violent:
Figure 1: BTC-USD, 2-Hour Candles, Macro Trading Range
Zooming out, we can see the market has been bound within a trading range. Continuing from our previous discussions about the potential of a distribution trading range, we can see bounces decreasing not only in volume but in price volatility. These bounces (labeled “LPSY” for “last point of supply”) give us hints as to the ultimate direction this trend might head. The pink dashed line shows a trend of lower highs that are coupled with overall, decreasing volume indicating that not only is demand drying up, but supply is increasing.
When put in the context of the macro trend, bitcoin appears to be consolidating in a sideways fashion:
Figure 2: BTC-USD, 6-Hour Candles, Macro View
The price over the last couple weeks has begun to narrow as the price volatility is decreasing along with the volume. While it could be argued that this type of consolidation represents a “Bear Pennant,” for the sake of neutrality, we can view this as a “symmetrical triangle”:
Figure 3: BTC-USD, 6-Hour Candles, Symmetrical Triangle
A triangle of this magnitude would have an approximate $6,500 move. Typically, symmetrical triangles are agnostic and can lead to a bullish or bearish breakout. If this triangle breaks upward, we can expect to see a price target of $22,000 or so. However, if this consolidation pattern breaks to the bottom of the triangle, we can expect to see prices as low as $7,000.
Bitcoin is beginning to see decreased volatility as the volume begins to consolidate in the $14,000 values.
A symmetrical triangle is beginning to form that could possibly break upward or downward.
If the symmetrical triangle breaks upward, bitcoin can possibly see prices in the low $20,000s. If the triangle breaks downward, we can expect to see bitcoin test the $7,000s.
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Aerospace engineer turned crypto-market analyst. Bitcoin Schmitcoin became popular within the subculture of the Reddit communities and now posts his daily thoughts and market outlook via Twitter and his regular stream on Twitch.tv.
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