Bitcoin, the world’s largest cryptocurrency, has been on a remarkable uptrend since finding support at the $15,500 level in November 2022. Over the past six months, the price has more than tripled, currently trading around $66,000 as of early May 17th, 2024.
This impressive rally has led to the formation of a bullish “cup and handle” chart pattern on the daily timeframe, which could potentially forecast a substantial breakout for the digital asset.
TLDR
- Bitcoin price is forming a bullish “cup and handle” chart pattern, which forecasts a potential rally to $123,240 (77% upside) if it breaks above $69,150.
- However, the pattern is not yet confirmed, as the “cup” part is still incomplete, and a daily close below $60,000 could invalidate the bullish thesis.
- Bitcoin has been in a solid uptrend since November 2022, more than tripling from $15,500 to the current level around $66,000.
- The recent stall in Bitcoin’s rally is attributed to Federal Reserve officials tempering expectations of interest rate cuts in 2023, weighing on risk appetite.
- Regulatory uncertainties and muted capital flows continue to limit broader cryptocurrency market sentiment, with major altcoins underperforming Bitcoin in recent sessions.
The “cup and handle” pattern is a technical formation that consists of a rounded bottom (the “cup”) followed by a brief downward trend (the “handle”) to the right of the cup’s peak.
A trend line drawn connecting the cup and handle’s peaks is known as the “neckline,” and a clear daily candlestick close above this level is considered a crucial confirmation for the pattern.
In the case of Bitcoin, the neckline is currently situated around $69,150. If the price manages to breach this level convincingly, the pattern projects a potential rally of 77% to $123,240.
This target is calculated by measuring the distance between the cup’s peak and its bottom, and then adding that distance to the breakout point at $69,150.
Such a move would be significant for Bitcoin, as it would represent an 86% ascent from the current price and propel the cryptocurrency into uncharted territory, breaching the psychological levels of $100,000 and $200,000 in the process.
However, it’s important to note that the “cup and handle” pattern is not yet complete, and confirmation is still pending. The “cup” part of the formation is still in progress, and the price needs to clear the breakout level at $69,150 to validate the bullish setup.
At the time of writing, technical indicators suggest a potential pause in the uptrend. The relative strength index (RSI) is facing downward, implying that bears may be regaining control temporarily.
Additionally, the price strength indicator at 57 suggests that market conditions remain favourable for the upside, but not overwhelmingly so.
If Bitcoin were to turn lower from the current level and post a daily candlestick close below the $60,000 psychological level, it would create a lower low and invalidate the bullish “cup and handle” thesis.
In such a scenario, the price could revisit the bottom of the “cup” at $15,000, representing a substantial 75% decline from the current level.
The recent stall in Bitcoin’s rally can be attributed to a slew of warnings from Federal Reserve officials, who have largely cooled optimism over interest rate cuts in 2023.
Despite some soft consumer price index readings, which had fueled hopes of a potential rate pivot, Fed members have stated that the central bank needs to see more convincing evidence of sustained inflation cooling before considering rate cuts.
These comments have sparked a recovery in the U.S. dollar and stalled a rally across risk-driven assets, including cryptocurrencies. Moreover, sentiment towards the broader crypto market remains constrained by fears of additional regulatory action against the industry.
Major altcoins, such as Ethereum, Solana, and XRP, have largely retreated or underperformed Bitcoin in recent sessions, reflecting the muted capital flows and tepid risk appetite within the cryptocurrency space.
