After reaching an all-time high of $20,000 in December 2017, Bitcoin (BTC) fell to a bottom near $3,000 the following year. Throughout 2019, however, Bitcoin has already risen to over $8,000.
There are many signs that a retracement may be imminent. In our May 24 technical analysis of Bitcoin, we observed price losses following an apparent double top pattern.
Drops preceded the second top as expected.
Since the publication of that analysis, BTC has risen slightly and currently may be generating a triple top pattern. This could lead to more significant losses in the short-term.
A retracement may bring Bitcoin toward a critical support area around $6,000 examined more closely in our latest BTC/USD and BTC/EUR analysis. This support is shown alongside a resistance area with a top near $10,000 in the graph below:
If the triple top pattern is formed, then a drop toward $6,000 becomes more likely. Furthermore, if Bitcoin is heading toward a new ATH, we should expect several retracements along the way.
According to Josh Rager, there were at least nine retracements of 30 percent or more during the 2017 uptrend.
However unlikely, we cannot overlook the fact that a retracement may lead to a reversal. This would occur if the critical support level traced above is breached.
If a reversal begins, we may drop toward levels seen before Bitcoin’s last surge in early May. This would bring Bitcoin back toward the $5,000 psychological threshold.
However, the RSI currently appears to be increasing. There was an important bullish cross on May 10, and volume appears to be stabilizing to average levels. Together, these indicators suggest that a reversal should not be expected.
Rather, it’s more likely that a short-term retracement toward the critical support area around $6,000 will precede an uptrend toward $10,000.
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.