Bitcoin has formed lower highs and lower lows to consolidate in a falling wedge pattern on its 4-hour time frame. The price has broken past the wedge top to signal that a climb is in the works, possibly lasting by the same height as the chart formation.
The price has already moved past the 100 SMA dynamic inflection point as an early signal of bullish momentum, possibly taking bitcoin up to the 200 SMA dynamic resistance next. The wedge pattern spans $9,000 to around $13,500 to signal that a climb of around $4,500 might be in the works.
Also note that bitcoin has been able to climb slightly past the $10,000 key psychological barrier, likely drawing bullish attention once more. However, RSI is already turning lower from the overbought zone to signal that selling pressure is returning. This could lead to a pullback to the broken wedge resistance around $9,500 before the climb gains traction.
Stochastic is also in the overbought region to show that bullish momentum is exhausted, so turning lower could mean that selling pressure might return from here. Stronger bearish pressure could take bitcoin back inside the wedge and allow the selloff to resume.
BTC/USD Chart – TradingView
The recent bitcoin rally is seen to have been a result of the Fed interest rate cut this week. Indications that another rate cut might be in the works could drive the dollar further south and bitcoin much higher. According to Tom Lee of Fundstrat:
“Bitcoin’s becoming increasingly a macrohedge for investors against things that could go wrong. Rate cuts are adding liquidity. Liquidity is pushing money into all these risk assets and also hedges, which is helping Bitcoin.”
Still, the upside could be limited as traders might still be feeling cautious about potentially tighter regulation as the earlier rallies caught the eye of US officials. As it is, many are worried that the rise of cryptocurrencies could destabilize the financial system, particularly with the launch of Facebook’s Libra.
Images courtesy of TradingView
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