Analysts and traders in the cryptocurrency market are always on the lookout for strong bullish signals that could indicate a potential rally. One such pattern that has recently caught the attention of Matt Dines, the Chief Investment Officer at Build Asset Management, is the classical ‘Cup and Handle’ pattern in the Bitcoin (BTC) price chart. According to Dines, this pattern could potentially signal an impending rally to $75,000.
The ‘Cup and Handle’ pattern consists of two parts: the ‘Cup’ and the ‘Handle.’ The ‘Cup’ part of the pattern began forming in March 2022 when the Bitcoin price plunged below $48,000 and entered a bear market. The pattern reached its lowest point at approximately $17,600, indicating a strong support level for Bitcoin.
The left side of the pattern resembles a rounded bottom, resembling a ‘cup.’ This formation occurs when the price initially declines, then consolidates, and finally starts to rise again. Bitcoin’s price has been steadily recovering since hitting the bottom, mirroring the right side of the cup. This indicates a bullish reversal of the previous downtrend.
Dines explains that the ‘saucer’ or the ‘cup’ signifies a consolidation period, a pause in the downward trend, before the price begins to rise again to test resistance levels. Bitcoin completed the ‘cup’ portion of the pattern in early January this year by recovering to the initial resistance line.
Following the recovery, the ‘Handle’ is represented by a moderate retracement, which forms a small dip or pullback from the peak. This handle is considered the final consolidation before a breakout. The Bitcoin price dropped to $38,600 at the end of January, marking the bottom of the pullback. With the breakout above $48,000, the cup and handle pattern was validated.
Dines discusses the placement of the vertical projection from the bottom of the handle, stating that it is arbitrary and subjective. However, he explains that traders often use the height of the cup to set their price target. By adding this height to the bottom of the handle, a guesstimate for the price target can be obtained.
Based on the chart, the height from the cup’s low to the resistance level is roughly $31,973. Projecting this height from the handle’s formation suggests a price target in the vicinity of $75,000.
Dines recognizes that the collective behavior of market participants will ultimately guide the price movement. He explains that many longs, who entered on the break, would set a retrace at around $75,000 to close out their positions. If enough participants put this trade on, it could set the dominant price action and turn the chart into reality.
While the ‘Cup and Handle’ pattern in the Bitcoin price chart suggests a potential rally to $75,000, it is important to remember that investing in cryptocurrencies carries risks. It is crucial to conduct thorough research and make informed investment decisions. The insights provided by the pattern should be used as a tool for analysis, rather than definitive predictions of future price movements.
At the time of writing, Bitcoin is trading at $51,821. As always, exercise caution and use information provided on this website entirely at your own risk.