Bitcoin’s (BTC) price is largely unchanged on the day and maybe building for a strong exit from the weeks-long period of consolidation.
The leading cryptocurrency hit highs above $4,100 on Jan. 8 before moving lower to around $3,500, where it's become trapped in a tightening trading range.
The bears have persistently failed to keep prices below $3,500, weakening the bearish case put forward by the 9 percent drop seen on Jan. 10. That strong support level has seen the formation of a descending triangle pattern over the last 2.5 weeks, with an upper edge at $3,600 and the base located near $3,500.
Bitcoin is currently trading at $3,550 on Bitstamp, representing a 0.4 percent change on a 24-hour basis.
The probability of a bullish breakout appears high, as the sluggish price action suggests the sellers have run out of steam. Further, prices barely moved following the withdrawal of Cboe's exchange-traded fund (ETF) proposal on Wednesday.
It worth noting that, on Thursday, the trading range (spread between the price high and low) stood near the three-month low of $45.17 registered on Jan. 12. That was the fourth sub-$50 trading range of this month, according to CoinMarketCap..
On the previous three occasions, the trading range widened sharply on the following day, so if history repeats, we may see some movement in the next 12-24 hours.
A convincing break above $3,600 on the 4-hour chart would confirm a triangle breakout and open the doors to $3,774 (Jan. 19 high). A violation there would expose the psychological hurdle of $4,000.
The descending triangle is widely considered a bearish continuation setup and it often ends up accelerating the preceding move. As a result, a downside break, if confirmed, could prove costly.
- Bitcoin looks likely to witness a triangle breakout in the next day or two. That would allow a rally to resistance levels lined up at $3,774 and $4,000.
- A triangle breakdown – acceptance below $3,470 – would reinforce the primary bearish trend (downward sloping 10-week moving average) and boost the odds of a drop toward December lows near $3,100.
Disclosure: The author holds no cryptocurrency at the time of writing.
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