Bitcoin’s (BTC) price is largely unchanged on the day and maybe building for a strong exit from the weeks-long tight trading range.
The leading cryptocurrency hit highs above $4,100 on Jan. 8 before moving lower to around $3,500, where it’s become trapped in a tightening trading range.
The bears have persistently failed to keep prices below $3,500, weakening the bearish case put forward by the 9 percent drop seen on Jan. 10. That strong support level has seen the formation of a descending triangle pattern over the last 2.5 weeks, with an upper edge at $3,600 and the base located near $3,500.
Bitcoin is currently trading at $3,550 on Bitstamp, representing a 0.4 percent change on a 24-hour basis.
The probability of a bullish breakout is high as sellers seem to have run out of steam. After all, the cryptocurrency barely moved following the latest exchange-traded fund (ETF) withdrawal on Wednesday.
Further, with daily trading range at lows below $50.00, the breakout could happen in the next 24 hours.
On Thursday, the spread between the high and low (trading range) stood near the three-month low of $45.17 registered on Jan. 12. That was the fourth below-$50 trading range of this month, according to CoinMarketCap.
What’s more important is that on the previous three occasions the trading range had widened sharply on the following day.
A convincing break above $3,600 on the 4-hour chart would confirm a triangle breakout and open the doors to $3,774 (Jan. 19 high). A violation there would expose the psychological hurdle of $4,000.
It is worth noting that the descending triangle is widely considered as a bearish continuation setup – the pattern often ends up accelerating the preceding move.
As a result, a downside break, if confirmed, could prove costly.
- Bitcoin is more likely to witness a triangle breakout in the next 24 hours. That would allow a rally to resistances lined up at $3,774 and $4,000.
- A triangle breakdown – acceptance below $3,470 – would reinforce the primary bearish tend (downward sloping 10-week moving average) and boost odds of a drop to December lows near $3,100.
Disclosure: The author holds no cryptocurrency at the time of writing.