The holiday season was spectacular for bitcoin last year.
The oldest and largest cryptocurrency was trading for about $6,000 per coin on Halloween 2017. By the time we got to Christmas, bitcoin was above $19,000 per coin.
Of course, we all know what happened next.
It’s the same thing that always happens when an asset price goes parabolic to the upside.
Bitcoin crashed. It gave back all of the gains of the parabolic rally phase. And, for the past few months, bitcoin has been stuck in a relatively tight trading range between $6,300 and $6,600 per coin.
But, it looks to me like bitcoin is gearing up for another year-end rally.
Take a look at this chart of the NYSE Bitcoin Index – which tracks the price of bitcoin…
This chart is forming a tight “consolidating triangle” pattern (the blue lines). Bitcoin is rapidly approaching the apex of the triangle. So, the price is set to break out of the pattern, one way or the other, within the next week or two.
All of the technical indicators are in neutral territory. So, they’re not offering any clues on the potential direction of the coming breakout. But, to me, this chart looks more bullish than bearish.
A breakout to the upside – above $6,600 per coin – should lead to a rally up to at least the first resistance level around $7,500. A stronger move could target the next resistance level at about $8,100. A move towards either of those targets would be a tremendous short-term gain.
Bitcoin bulls might be a little disappointed in those price targets, though. They might be looking for a move back towards last year’s high of almost $20,000 per coin.
That’s not going to happen – at least not anytime soon.
Parabolic tops – like the one formed on bitcoin last December – tend to mark the top of the price for several years. Think about the parabolic top in silver back in August of 2011, when silver traded up to $49 per ounce. That was seven years ago. And while silver has had many decent rallies over the past few years, it has never come even close to getting back towards the $49 level.
I could be wrong, of course. But I don’t see bitcoin trading back up to $20,000 for a very, very long time. But I do think bitcoin could run as high as $8,000 or so over the next several weeks.
That would be a very solid gain on this beaten-down asset.
Best regards and good trading,
What direction do you see bitcoin heading in? What do you think about cryptocurrencies, in general, and do you own any?
As always, send any questions, suggestions, or trading stories to [email protected].
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