Bitcoin could be due for a big breakout as it formed a triangle consolidation pattern on its 4-hour time frame. The price made higher lows and slightly lower highs to create a somewhat symmetrical triangle pattern.
The price just bounced off support and is about to test the resistance around the $4,050 area, with a break higher likely spurring a climb that’s at least the same height as the chart pattern. Similarly, a break below support at $3,900 could lead to a drop of the same size.
The 100 SMA is above the longer-term 200 SMA to hint that the path of least resistance is to the upside or that resistance is more likely to break than to hold. These moving averages are also near the triangle bottom to add to its strength as support.
However, RSI seems to be topping out close to the overbought zone and could be due to turn lower. In that case, selling pressure could return and lead to another dip to the triangle support. Stochastic is also in the overbought zone and might be ready to head south, so bitcoin price could follow suit as sellers take control.
For now, it looks like Bitcoin is safely riding on optimism to start the year, especially since analysts are dishing out bullish forecasts in the coming months. Traders are hoping that institutional investment could kick in as more platforms become available, and many are banking on this to sustain volumes.
Still, market participants appear to be holding out for actual industry developments before piling on long positions. The test of nearby resistance levels could indicate whether or not traders are staying cautious and quick about booking profits for fear of yet another leg lower.
If Bitcoin is able to hold its ground above the $4,000 support area, more bulls could be encouraged to join in as this would confirm that price has indeed bottomed out.
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