Bitcoin Price Trading Analysis; Will BTC’s Reversal Be Swift Or Dragged Out?


The month of May saw BTC/USD record the worst monthly return since November 2018, closing the monthly candle in a long black body at $37,341, down 35% from a $57,791 open for May.

photo20210602201315On the face of it, that doesn’t look awfully promising. But as ironic as it may seem, despite the alarming slide, BTC/USD managed to establish firm support at $30,400 long-term support zone towards the end of May and looks primed for a recovery.

Unlike following the November 2018 crash, the recovery may not be quite so sluggish this time. We may see a pretty swift reversion to the mean in the coming weeks.

After testing the $30,400 zone twice in the last 2 weeks since what has now been chalked up to retail capitulation over energy FUD and China ban FUD, BTC/USD has since settled into a falling wedge pattern on the daily (charted below).

BTC1

Successive bullish RSI divergences followed by a bullish RSI failure swing, pending confirmation by way of daily close on Wednesday, indicate that a strong recovery is imminent. Bullish OBV divergence is further confirmation of a bullish reversal. The potential for a bullish failure swing reversal was identified in last week’s analysis.

If the falling wedge breakout is confirmed by daily close, the target for the breakout would correspond with the S/R flip at $43,000. While this is likely to be a strong resistance zone, it could be overcome with sufficient momentum. Momentum at this price level will determine the swiftness of the recovery. Keep an eye on momentum indicators such as ADX.

Looking at the monthly chart, it increasingly resembles the price action of 2013 when BTC/USD hit a peak price of $259 in early April, followed by a sharp correction of 70% before scaling back to new highs towards the end of the year and breaching the four-figure mark for the first time in November 2013.

BTC2

Similar to the last two post-halving bull cycles, we may see the twin-peak price action again this year. The last two cycles resulted in the breach of four-figure and five-figure valuations, respectively. It seems plausible that if the twin-peak pattern holds true, BTC/USD could breach the six-figure mark by the end of 2021.

While past performance is not always indicative of the future, in Bitcoin’s case, for the fact that it is scarce money predicated on hard-coded mathematics with a preordained supply curve, it stands to reason that the price action is both cyclical and inexorably metronomic.

We may infer from the last two cycles that it takes roughly 18 months for the natural supply side of newly issued bitcoins as block reward reducing by 50% to fully impact the market’s price discovery. Whether this holds true again, we’ll find out over the next 5-6 months.

Market Summary

  • Key support levels – $34,700, $36,000
  • Key resistance levels – $40,600, $43,000
  • Market outlook – Imminent bullish breakout

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