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Bitcoin has lost nearly half of its value since peaking above $125,000 last October. Now multiple catalysts are converging at the same time to drive the next big move.
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That includes legislation making its way through Congress. The Clarity Act would help establish a regulatory framework for digital assets (including crypto) and is waiting for a vote in the Senate.
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At the same time, investors will parse every word said and written following the Federal Reserve’s latest meeting this week.
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New Fed Chair Kevin Warsh has already surprised investors with hawkish talk on inflation. The forward path of monetary policy will play a big part in driving market liquidity… and Bitcoin.
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For crypto traders wondering how it will all play out, zooming out and tracking key chart levels can help tip the next move. Here’s what I’m watching…
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Bitcoin’s Bearish Trend
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Following Bitcoin’s peak last October, the largest crypto by market value has settled into a recurring bearish chart pattern.
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Here’s the chart below:
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The dashed trendlines show the last two bear flag patterns. It’s when Bitcoin has traded inside a channel against the prevailing trend, which has ultimately led to new lows. It’s a bearish flag in this case because the pattern is upward sloping and formed within an overall downtrend.
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That’s keeping the trend of lower highs and lower lows intact – the definition of a primary downtrend.
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The most recent break brought Bitcoin right back to a key support level. The area around $60,000 (shaded zone) has been tested multiple times this year. It’s also a key congestion zone tested numerous times in 2024.
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That makes the $60,000 area an important “make-or-break” level that you need to watch closely.
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Here are the signs that would point to a major breakdown… and what could spark a rebound instead.
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Each week, Market Wizard Larry Benedict goes live to share his thoughts on what’s impacting the markets. Whether you’re a novice or expert trader, you won’t want to miss Larry’s insights and analysis. Even better, it’s free to watch. Visit us on YouTube to catch the latest! |
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Bitcoin’s Key Chart Levels
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Bitcoin has seen a rally off the most recent test of $60,000, which was tipped by a positive momentum divergence.
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Here’s the zoomed-in chart below.
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The Relative Strength Index (RSI) tracks underlying price momentum. It made a higher low as Bitcoin briefly made a new low under $60,000 (dashed lines).
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That bullish divergence at a key support level tipped a rebound. But now we have another bearish flag pattern emerging. Take another look at the chart.
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The third set of dashed lines shows the latest flag pattern forming. At the same time, Bitcoin is testing resistance at the 50-day moving average (MA – blue line).
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With all the catalysts in play, including the Fed and crypto legislation, we need to stay open to possible trade scenarios.
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The first scenario is another breakdown out of the current bear flag pattern. That could put the $60,000 level back in play, where a sustained breach of support could lead to another sharp move lower.
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But a false breakdown alongside another momentum divergence (like the RSI example noted above) could deliver a powerful reversal higher.
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Those are the scenarios that you need to watch for the next big move in Bitcoin – and how you can use technical analysis to stay objective amid all the noise.
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Happy Trading,
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Larry Benedict
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