Bitcoin – The Battle for 40K Is Still On

From Volatility Beast to Range-Bound and Docile Price Action

by Bogdan Giulvezan

Bitcoin, the coin that’s known to break through S/R levels like a hot knife through butter, has been moving in a tight range since early March. It spent most of 2022 inside the horizontal channel created by $37,500 – $45,000 and it formed a triple top as well as a triple bottom. This can mean one thing: the apex cryptocurrency is getting ready for a breakout!

Bitcoin’s latest move is a bounce at $37,500 support, which marked the creation of a triple bottom chart pattern. This is a very important pattern, as evidenced by the recent triple top, about which we talked in a previous post. As predicted, that triple top resulted in a sharp drop that took BTC/USD from $45,000 to $37,500 in a few short days.

Now that a triple bottom is formed, can we expect a sharp rise? According to the principles of technical analysis – yes. But things are not always black and white… When the triple top formed, Bitcoin was in a relative downtrend, thus a drop was more likely, but for the triple bottom to work, a reversal has to happen, which is more difficult because it’s against the prevailing trend. However, the current triple bottom could just send the price into $45,000 resistance; if no break occurs there, then we are not talking about a reversal, just a continuation of the range-bound trading that’s been going on so far.

Another factor that could fuel the bullish scenario is the US Dollar Index (DXY) and its correlation with Bitcoin. The index dropped to 97.72, which is the lowest in a week (overall DXY is still up for 2022). Usually, when the DXY goes up, BTC goes down and vice-versa, meaning that if the greenback continues to weaken, we will see BTC/USD go up.

Technical Outlook – BTC/USD

At the time of writing, Bitcoin is trading at $40,600, in very close vicinity of the key S/R level at $40K. Although the digital asset is trading above the level, we cannot consider this a breakout because price is lacking momentum.

The 50-day Moving Average is flat, the RSI is trading in the middle of its range and the MACD lines are moving sideways, hugging each other. All these indicators show a lack of momentum in the market.

Bitcoin’s price has moved above a minor bearish trend line and bounced off of a bullish trend line located near $37,500. These are bullish signs but the lack of force/momentum means that price may return below $40K and the mentioned bearish trend line.