Bitcoin is in a consolidation phase and there has not been any significant impulse over the last two months that signals where it is heading next. However, one of the most prominent technical analysts in the cryptocurrency community recently took to Twitter to express his views on BTC’s future.
Bitcoin is on the verge of a major move
Bitcoin’s recent price movement appears to be forming a descending triangle on the 1-day chart, according to 40-years trading veteran Peter Brandt.
Bitcoin meets the definition of a descending triangle. Don't let newbie chartists tell you different. Right-angled triangles imply (but do not demand) a resolution thru the horizontal boundary. $BTC pic.twitter.com/DIW1BpMSCV
— Peter Brandt (@PeterLBrandt) September 7, 2019
Despite the popular belief that descending triangles are continuation patterns that could break out in the same direction as the trend that was in place prior to the triangle’s formation, Brandt believes otherwise.
The renowned technical analyst considers this type of chart patterns as bearish formations that are characterized by a series of lower highs and a series of nearly identical lows. Under the current conditions, Brandt expects the descending triangle to resolve through the “horizontal boundary.”
If this is the case, Bitcoin could plummet over 30 percent after a downward move outside of the descending triangle. This target is given by measuring the height from the upper to the lower trendline.
Nonetheless, Thomas N. Bulkowski, a successful investor with 35 years of experience in the stock market, in his website ThePatternSite.com highlights that descending triangles can break out in any direction, but tend to be upward 53 percent of the time. The probability for a bullish breakout increases to 63 percent when prices rise into the pattern, according to Bulkowski.
Although Peter Brandt believes that descending triangles are not descending triangles until completion, he also recognizes the probability of a bullish breakout.
“There have been numerous occasions over the years when prices blew out of the upside of a descending triangle,” added Brandt.
Due to the opposing views that descending triangles have, both analysts recommend waiting for confirmation before entering a bullish or bearish trade.
A spike in volume in combination with a move above $10,950 could signal a bullish breakout. Meanwhile, an increase in the selling pressure behind Bitcoin that takes it below $9,300 could indicate a further decline to $6,500.
As Bitcoin gets closer to where the upper and lower trendline converges, volatility is decreasing. At the moment, it cannot be determined the direction in which BTC will break out of the descending triangle formation that is forming on the 1-day chart. Thus, waiting on the sidelines for a clear move out of the pattern would be the preferred choice to avoid risk exposure.
Cover Photo by Waldemar Brandt on Unsplash