The price of Bitcoin reached an all time high of $65000 on April 14 this year, after which it puled back to $47000 on April 25 before exploding higher again. However, this latest move upwards has not been very convincing in terms of volume, nor in terms of search interest. It looks set to fizzle and drop. If so, we might see a head and shoulder pattern form in the Bitcoin chart, with a left shoulder higher than the right shoulder.
This emerging pattern is easiest to spot in the 5 months chart. A straight line can be drawn between the local bottom on March 25, at $51000, and the local bottom on April 25, at $47000. When extended into the future, this straight line crosses $45000 and subsequently $40000 later this month. When extended into the past, the line rests nicely on top of the temporary top of about $50000 back in late February. The line seems therefore significant in more ways than one, and may become the critical support level for Bitcoin going forward.
If the price of Bitcoin breaks through the $45000 to $40000 level on its neckline later this month, a further 50% fall can be expected, bringing Bitcoin all the way down to about $20000 before finding significant support. This can be found by measuring the distance between the neckline and the top, which is about $20000, and subtract this from the point where the neckline breaks.
$20000 was the highest price reached back in 2017, and is therefore extra strong as support, so the brave speculator can use this as an entrance point for a short term bet on Bitcoin going up to at least where the neckline is at that future time. However, there's no sure way of telling if the current move is indeed the beginning of the end of the uptrend in Bitcoin. The prudent thing to do would therefore be for those invested in Bitcoin to take at least some money off the table, and to wait and see before making any new bets.
As explained earlier, I'm never going to put any money into Bitcoin myself. It doesn't fit the conservative investment profile of my portfolio. However, I find it an interesting phenomenon to watch from the side-line, and therefore something worth commenting on.
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