Market Overview: Bitcoin
This week, Bitcoin triggered a High 3 signal bar on the daily chart and tested the next target, which was the significant round number of $110,000. In the long term, bulls remain focused on the continuation of the Cup and Handle pattern that has been forming on the weekly chart. Compared to its 2021 counterpart, this current setup appears more technically sound and well-defined. Despite some short-term selling pressure, the broader structure still favors a bullish outlook, assuming the market handles the developing Handle formation with resilience.
Bitcoin
The Weekly chart of Bitcoin
The weekly chart is displaying a Cup formation that apparently resembles the 2021 Cup and Handle pattern.
- The right side of the cup was built through a 7-bar bull micro channel, culminating in a test of the previous all-time high, referred to as the “previous range’s high.”
- Price then reversed downward from that level, laying the groundwork for a potential Handle formation.
- Bulls are aiming for a shallow, sideways Handle, which would preserve the bullish integrity of the Cup and Handle and support a breakout to the upside.
- A deeper Handle would risk invalidating the structure, making the current price action especially critical.
Last week, price broke below the prior week’s low, interrupting the 7-bar bull channel, but then reversed upward from that point.
- We previously noted that the relationship between the weekly close and the prior week’s low would be important.
- Price ended up closing above the prior week’s low, which is a positive sign for bulls—or at the very least, a setback for bears.
- This week, price initially traded above last week’s high but has since reversed and is now trading below that high.
- This overlap is interpreted as constructive for bulls, suggesting support below and indicating the market is in breakout mode.
- Breakout mode, however, does not mean a one-way move; it’s a double-edged scenario. Bulls are preparing to buy a breakout above the Handle, and bears are prepared to sell a failure.
There is a strong bullish argument: above the Handle, there is no historical price resistance. This means a “green field,” with higher probability of reaching, at the very least, the magnet created by the measured move from the 2021–2022 drawdown.
On the bearish side, a breakout to the downside is also technically valid, especially since the market is currently at the top of a larger range.
- The Low 2 setup could function as a bear signal, though bulls were strong forming the right side of the Handle.
- A breakdown and test of the $90,000 area would invalidate the Cup and Handle, but buying pressure at that level—and a second leg up—would still be likely.
Overall, it appears more advantageous to play this pattern from the buy side. The potential upside is attractive, and the trade management is simpler compared to taking a short position.
A bull run had been anticipated for Q2 (beginning in April), and it materialized. This move was backed by:
- Technical signals: a weak bear breakout of a Double Top and a “High 3” setup at strong support, defined by the prior breakout point and the 1-year average price.
- Fundamental dynamics: Institutional quarterly rebalancing introduced significant buying pressure.
Looking ahead, Q2 2025 is likely to close significantly higher than Q1. As institutions rebalance early in Q3, they will likely become net sellers of Bitcoin.
- This selling pressure might not cause a major drop by itself, but it adds to supply, so the market’s reaction in early July will be crucial.
In summary, bulls see a technically constructive Cup and Handle pattern in progress, targeting a breakout from the Handle and a strong continuation of the broader bull trend.
The Daily chart of Bitcoin
The daily chart reveals a classic Spike and Channel bull trend.
- However, zooming out shows that this bull channel follows a previous bear trend, introducing latent resistance and trapped long positions, making this bull channel trickier to trade.
- As is typical, about 70% of bull channels break below their lower trend line, and this has already occurred.
- Following the bear breakout, a trading range was expected, as mentioned in previous analysis.
Price has since formed a Triangle pattern, which serves as both a trading range and breakout mode setup.
- Triangles, especially compressing patterns like this one, are easier to trade than expanding ones because of smaller risk.
- In this case, bulls prefer to see each leg cut roughly in half compared to the previous one, a sign of compression.
- With two legs now in place, the pattern is considered tradable.
Looking to the left side of the chart, the presence of a bull channel suggests underlying buying pressure.
This makes the upper breakout more appealing.
- When trading assets that are in price discovery mode—hitting new all-time highs—there is no historical resistance, and thus fewer trapped bulls. This inherently favors the upside.
- In contrast, during intraday trading or within historical ranges, both sides often present more balanced opportunities.
Bears have already reached their first downside target, which was the most recent major higher low just before the bull climax.
- The bear breakout bar that ended the channel was a potential short entry, but its location—right above the 30-day moving average—made it a difficult short, as many missed bulls were eager to buy there.
- Most bears chose to wait for a clearer lower high and a more decisive major trend reversal.
Since reversing from the all-time high, there have been three downward pushes, each followed by sideways-to-up corrections—a clear indication of bear weakness.
- The initial High 1 buy setup occurred too early, after three upward legs near the top of the previous channel. Consolidation was expected before bulls re-engaged.
- The High 2 setup was more favorable, forming at the 30-day moving average, though another leg down remained a possibility due to the recent sharp bear breakout.
- The High 3 setup was identified last week as a reliable buy signal. Bulls took profits near resistance levels, which included the prior lower high and the $110,000 round number.
Last week, we noted that the overall market structure had entered a trading range and that this condition would likely persist.
- This week’s action confirmed that expectation, though the movement was slightly sharper than predicted.
- Nonetheless, all price gaps have been closed, in line with our forecast.
Best current strategies:
- Look for a breakout above this week’s high to trigger the next leg of the bull trend.
- If more consecutive bear bars appear below the 30-day moving average, short setups may become viable. For now, most of the downside movement appears to be driven by bulls taking profits—not by bears building pressure.
This is a clean and classic pattern, one that appears frequently across crypto assets and liquid stocks throughout the year.
- It is both fun and effective to trade, and highly recommended for active traders.
- The typical sequence is: long-term bull trend, followed by a 15–30% deep trading range, then full recovery, triangle formation, and finally a bull breakout from the triangle.
- It’s an easy pattern to manage, especially for trend-following strategies.
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