Here’s One Bitcoin Chart Formation You Should Keep a Close Eye On
After months of uncertainty concerning which way Bitcoin is headed in the immediate future, we could now be just hours away from knowing for sure.
When the BTC price peaked at $13,775 on June 26th, it subsequently dropped to the $9,000 range, before surging to $13,000 once again just days later.
This pattern is known as a double-top formation, and it almost always signals the end of price surge. The same thing can be seen in the charts of most traded assets.
So it might be interesting to know that Bitcoin is now on course to reject this double-top formation, and continue to surge on past the peak it recorded in June. This has only happened once before in Bitcoin’s history – in August 2017; four months before BTC surged to its $20,000 all-time high.
Bitcoin on Course to Reject Double-Top Formation
Here we have the double-top formation from June. As you can see, after the twin-peaks in the $13,000 range, the price sunk back down to $9,000 soon afterwards.
In the past week the Bitcoin surge suddenly kicked into gear again, sending the price up to $12,250. Double-peaks litter Bitcoin’s recent history, but only now do we see the prospect of a third peak arising. There’s very little precedent for a triple-peak top, and it would be fair to assume that if $13,775 is cleared in the next few days, the door is open for BTC to reach at least $20,000, and possibly higher.
The only time this has been seen before was right before the mega-bull run of 2017-2018. The chart below shows BTC’s double-to formation from August 2017, when the price surged to $4,500 twice within a matter of days.
Immediately afterwards, the price sunk to $3,600 – a 20% drop. This mirrors what we just seen with Bitcoin in 2019, but now we’re playing on a larger scale.
Whereas before the double-top took mere days to form, in 2019 it took weeks. Whereas in 2017 the drop from the peak amounted to 20%, this time it was over 30%. This can be explained by the massive increase in Bitcoin’s own scale since that time. The price is more than double now what it was then, while trade volume (however suspect) is increased by a factor of twenty.
If a friend asked you whether now was the time to buy Bitcoin, what would you tell them? By all accounts it looks like we’re headed upwards, but there’s still a few nagging thorns sticking in the side of this price pump.
First of all, the extent of the fake trade volume coming out of questionable exchanges, and Tether (USDT), is absolutely astounding. If you’re in any way excited about the $67 billion daily volume that CoinMarketCap reports, just remember that real trade volume is closer to 5% of that number.
Secondly, the ongoing Bitfinex trial at the New York Attorney General’s office could also have a say in where Bitcoin goes next. The trial was recently postponed for another 90 days, and you might suspect this uncertainty could wreak havoc on the BTC price.
In truth, the opposite is true. I think 90 days is enough time for Bitfinex/Tether to print some more un-backed USDT and pump the market to levels never seen before. All in time to cash out before the NYAG drops the hammer.
A less extreme consequence of Tether’s implosion could be that all the USDT trade volume suddenly gets funnelled through Bitcoin instead – assuming funds can be traded in time (which seems unlikely).
This is pure speculation, folks. But as a worse case scenario it does have a ring of logic to it. After all, much of the hype in 2019 thus far was founded on fake volume. Why wouldn’t this trend continue? (With this in mind, be ready to trade quickly when the peak comes, as there probably won’t be as much liquidity as we’d like to believe.)
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via CoinMarketCap.