The most popular cryptocurrency, Bitcoin, has been going through a consolidation phase, which means that its price is stuck within a small range rather than going up or down. We will examine two important charts that are pointing to a significant move for Bitcoin in the near future to reveal potential future trajectories.
The State of Bitcoin Price Consolidation
When Bitcoin moves within clearly defined support and resistance levels without breaking out in either direction, this is called price consolidation. This sideways trading suggests a lack of confidence in the market, where buyers and sellers are in equilibrium. However, it is frustrating for traders looking for momentum. When prices finally break out of their trading ranges, consolidations of this kind set the stage for possible volatility.
Bitcoin has repeatedly tested these upper resistance and lower support levels during consolidation, thereby establishing them as boundaries. The length of time spent within this range increases its significance in the event of a breakout.
Analyses of Charts: The Warning Signs of a Coming Big Move
In order to predict the potential course in which the price of Bitcoin will move, we will look at two important charts:
Chart of Bollinger Bands
One of the most widely used instruments in technical analysis for measuring market volatility over time is the Bollinger Band. The middle line, or simple moving average, and the outer lines, or standard deviations from the average, make up these bands. Contracting bands, which are frequently followed by significant price shifts, typically signify decreased volatility.
The current compression of bitcoin’s Bollinger bands suggests that there may be little price movement in the near future. The chart suggests that a significant upward trend may continue into 2020. As a result, traders should watch for breaks above or below the upper band. These actions may indicate a change in trend.
Chart of the Moving Average of Convergence Divergence (MACD)
To determine how far apart two moving averages are from one another, MACD is utilized. Additionally, the MACD and signal lines are used to identify buy or sell signals.
On the MACD chart for Bitcoin, a convergence of the MACD line and the signal line is a sign of momentum loss. This generally happens not long before a significant pattern shift. It is important to pay attention to any crossover, regardless of its direction, as it may signal the beginning of another trend.
What to Look For
As Bitcoin continues to consolidate toward an imminent breakout, these are important factors to keep an eye on:
Variations in volume
When prices change, volume is frequently one of the most important indicators. With an increase in volume and a breakout of the consolidation range, strong momentum and an increased likelihood of trend continuation are implied. On the other hand, if it breaks through at a low volume, it might suggest that we shouldn’t rely too much on it.
Reaction at Important Levels
The price of Bitcoin can indicate the direction of a breakout by how it reacts to these lower support and upper resistance levels. A new wave may be in motion if there is a decisive move above or below these levels accompanied by high buying or selling pressure.
The market and news sentiment
The price of Bitcoin can be influenced by market sentiment, newspaper events, and macroeconomic developments. Keep investors informed of any news that might have an effect on their behavior in order to make their lives easier.
Probable Effects
These could either be:
Positive Breakout
If bitcoin breaks above the strong resistance level with strong buy pressure and rising volume, this could signal the beginning of a bullish trend. The price would then need to push higher to test this support and attract additional new buyers, keeping an eye out for potential price targets at significant resistance levels in the event of a breakout.
Breakdown in the Bears
On the other hand, a negative sign for bitcoin’s prospects in the future is any significant sell-off that causes it to fall below the lower support level. Lower support levels may be retested as a result of significant declines in their value. As a result, traders should set stop-loss orders in anticipation of potential downsides.
Bitcoin’s current consolidation phase typically occurs significantly ahead of significant price shifts. MACD charts indicate a potential momentum shift in the near future, while Bollinger Bands analysis suggests a potential significant move. Consolidation presents challenges for traders, but it also presents opportunities for those who are prepared.
Traders and investors need to pay close attention to these charts and other indicators, like volume trends and market sentiment, if they want to profit from Bitcoin’s next big move. During this highly volatile time, staying up-to-date on what’s going on around you will keep you from making poor decisions. Always conduct research before making any investments or trades.