Bitcoin’s latest rebound from under $30,000 has increased its prospects of extending its retracement move even higher, at least as shown by one classic technical pattern. The megaphone-shaped pattern reflects some growing disagreement between the investors over the next Bitcoin trend bias.
Dubbed as the Broadening Formation, the megaphone-shaped pattern seems to appear whenever the price moves inside two diverging trendlines. According to an Investopedia statement, a broadening formation mainly represents disagreement over the next possible bias among investors. In that context, the price forms higher interim peaks and lower interim lows.
Bitcoin seems to be trading inside a similar structure, as shown in the chart below. Nevertheless, the cryptos currently lack volatility, which is one of the critical features of the widening formation pattern.
If this pattern eventually plays out, the price of Bitcoin will undergo a bullish breakout above the structure’s upper trendline. In doing that, it would anticipate rising by up to the maximum height between the broadening formation’s upper and lower trendline. The upside setup seems to come up since the traders interpret broadening formation as a trend reversal pattern.
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But until that happens, the pattern provides swing trading opportunities to daytraders. A bounce from the lower trendline seems to present Long opportunities toward the upper trendline, and a pullback from the upper trendline may have traders open short positions toward the lower line.
But, the BTC price volatility is lower enough to invalidate such intra-range setups.
The most interim resistance level is near the dashed trendline found in the Bitcoin market charts.
A close above the dashed trendline expects to have BTC price test $35,000 as its next resistance target. On any extended move higher, the possibility to hit $40,000 is higher according to the crypto’s recent price patterns.
On the other hand, a pullback from the dashed trendline seems to validate a Falling Channel pattern. In that case, Bitcoin may retrace its steps lower towards the so-called Broadening Wedge’s support trendline and the nearest downside target in such case would be $28,500.
Bitcoin Price Fundamentals
The conflicting BTC setups emerge as the bulls continue to defend $30,000 as support while the bears enjoy some control over the $34,000-$35,000 zone. However, that has, unfortunately, landed the price of bitcoin inside a constrained trading range, which gives no interim clues about where it wants to head next.
Various fundamentals have played a critical role in trapping BTC prices in recent weeks. To the upside, inflationary pressures from the traditional finance industry have offered tailwinds to Bitcoin’s haven narrative. In the meantime, the downside is an increasingly global regulatory discontent toward the crypto industry.
In the past two months, the market has seen China banning crypto trading and mining, India raiding regional cryptocurrency exchange WazirX, and the United Kingdom suspending Binance’s subsidiary from working and operating all its regulated businesses within its jurisdiction. Furthermore, Hong Kong and Japan also issued stern warnings and restrictions against Binance.
Earlier in the week, the United States state authorities shut down crypto firm BlockFi’s accounts, claiming that the startup sold unregistered securities. The industry also got criticism for increasing carbon footprints through mining, which needs heavy computational power to run the involved blockchains.
Founder, and CEO of Digitex, Adam Todd, told reporters:
“As long as global regulation of cryptocurrencies is not eased, or a resolution is met, I believe it is difficult to gain public trust, and for Bitcoin to scale the heights it reached in early 2021.”
The head of the Stuyvesant Square Consultancy, JG Collins, also wrote in his Seeking Alpha op-ed that:
“national economics regulators, state environmental regulators, and municipalities troubled by “mining” raising local electrical rates will sweep cryptos away like a tsunami.”