- Bitcoin pierced through $40,000 for the first time and established a new all-time high at $40,425.
- Support above $36,000 has seen BTC bounce back to $38,000.
- A rising wedge pattern on the 4-hour chart suggests that a reversal is imminent.
Bitcoin hit $40,000 for the first time in history on Thursday. However, the bellwether cryptocurrency did not stay up for long as a bearish wave swept across the market, forcing the prices down to an intraday low of $36,625 on Friday.
Bitcoin bounces back to $38,000, but the uptrend remains in jeopardy
The world’s most valuable cryptocurrency is exchanging hands at $38,340. Volatility is still exceptionally high, making it difficult to predict the asset’s short term price action.
However, the 4-hour chart highlights the formation of a rising wedge pattern. This is an extremely bearish pattern in technical analysis. It is created by connecting an asset’s higher highs using a trendline. On the other hand, its higher lows are also connected to form a wedge.
The pattern suggests that the asset’s trading volume is decreasing, and a reversal is likely in the near-term. A breakdown tends to occur before the trendlines converge. If validated, price action is usually drastic, which calls for alertness to take full advantage of the bearish pattern.
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BTC/USD 4-hour chart
If Bitcoin closes the day under $38,000, more sell orders will be triggered. An increase in overhead pressure might force BTC to explore lower price levels towards $34,000 and $30,000, respectively.
The 50 Simple Moving Average is in line to offer support and perhaps prevent losses from extending to $30,000. Similarly, the 100 SMA will absorb some of the selling pressure if BTC/USD slides under this critical level.
On the other hand, the pessimistic outlook will be invalidated if Bitcoin closes the day above $38,000. Some semblance of stability may call for more buy orders as investors push for gains above $40,000. Some analysts like Peter Brandt believe that Bitcoin is not anywhere close to its potential and could clock $50,000 in the short-term.
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