Bitcoin Shows Signs of Potential Reversal, Fueling Speculation of Double Bottom Pattern
In recent days, Bitcoin has displayed a potential reversal, with the cryptocurrency charting three consecutive green daily candles. This pattern has not been seen since early July and between mid and late June when Bitcoin surged from just under $25,000 to over $31,000. As a result, market sentiment has shifted from bearish to more bullish.
Analysts have begun discussing the possibility of Bitcoin forming a double bottom pattern, a significant technical indicator. A double bottom is a classic pattern in technical analysis that indicates a potential trend reversal from bearish to bullish. It is characterized by two distinct troughs or lows in the price chart, separated by a peak or minor high. The pattern resembles the letter “W,” with the first trough indicating a significant low, followed by a temporary rebound, and then a second trough, usually near the same price level as the first. A valid double bottom is confirmed when the price breaks above the peak or resistance level between the two troughs, signaling a potential upward trend reversal.
Renowned crypto analyst Rekt Capital recently shared his insights, suggesting that Bitcoin’s current price pattern on the weekly chart resembles a double top, which typically indicates a bearish reversal. However, for this to be confirmed, the price would need to break down from the $26,000 support. At the moment, Bitcoin is trading at $26,618, successfully fending off the double top validation.
On the flip side, a double bottom, which forms a “W” shape, would require Bitcoin to rebound from the $26,000 mark. Rekt Capital tweeted, “Could this BTC Double Top actually be a Double Bottom? And the simple answer is – technically, yes. […] But for BTC to form a Double Bottom, it would need to rebound from $26k and rally to $30.6k (which is its validation point).”
Rekt Capital also highlighted the challenges Bitcoin faces, including the uncertainty surrounding the $26,000 support level and the numerous confluent resistances ahead. These factors might hinder the completion of the double bottom formation. He emphasized the significance of the $26,000 level, stating, “It looks like BTC may be choosing the ‘relief rally’ route first in an effort to potentially turn old support into new resistance. The black Monthly level (~$27,200) is approximately confluent with the Bull Market support band as well.”
Furthermore, Rekt Capital pointed out Bitcoin’s recent bearish monthly candle close for August, noting that Bitcoin closed below approximately $27,150, confirming it as a lost support. He warned that the current price move by Bitcoin could only be a relief rally to confirm $27,150 as new resistance before dropping into the $23,000 region.
To confirm a double bottom pattern, Bitcoin needs to break several resistance levels. The major resistance level is $27,150, which must be breached before the double bottom can be confirmed. Additionally, there are other key resistances to overcome before reaching $30,600.
On-chain analysis firm CryptoQuant emphasized the role of short-term Bitcoin holders in providing liquidity for significant price movements. According to their data, the break-even price for these holders lies between $27,500 and $29,000. If Bitcoin remains below these levels for an extended period, these holders might be incentivized to sell, potentially exerting downward pressure on the price.
On the 4-hour time frame, Bitcoin needs to overcome three major resistances: $26,857 (38.2% Fibonacci retracement level), $27,365 (23.6% Fibonacci retracement level), and $28,186 (post-Grayscale high from August 29th).
As Bitcoin continues to navigate these resistance levels and the possibility of a double bottom pattern, market participants eagerly await further price movements and trend confirmations.
Sources:
– Rekt Capital: [Twitter](https://twitter.com/rektcapital/status/1702260725203239075)
– CryptoQuant: [Twitter](https://twitter.com/cryptoquant_com/status/1702516069146247603)
– Featured image from iStock, chart from TradingView.com
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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