Bitcoin’s Battle with Resistance Will It Break Out?

Picture Source: BeInCrypto

Bitcoin (BTC) enthusiasts have been closely monitoring the cryptocurrency’s price as it recently bounced, seemingly ending a consolidation phase that had persisted for nearly a month. However, a critical descending resistance line stands in its way, serving as a litmus test for a bullish trend reversal. In this analysis, we’ll explore how Bitcoin’s current movement compares to its previous cycle and assess the potential for a breakout.

A Glimpse at the Cycles: 2017 vs. 2021

The ongoing descent in BTC’s price since its all-time high in November 2021 bears a striking resemblance to the post-2017 high scenario. Both cycles witnessed a bottoming out after approximately 12 months, marked by a temporary Relative Strength Index (RSI) decrease below 50 (green circle) before eventually crossing above it.

The RSI is a pivotal momentum indicator used by traders to gauge market conditions, with readings above 50 indicating a bullish advantage and readings below 50 indicating the opposite.

In the previous cycle, BTC initiated a 340% upward surge (green) lasting 180 days, followed by a 70% correction over 270 days before the commencement of the next cycle. Notably, the price never dipped below the long-term horizontal support of $6,500.

In the current cycle, Bitcoin experienced a more gradual uptrend, achieving a 100% increase over 240 days, reaching a high of $31,800 in July 2023. If history rhymes, BTC may correct throughout the remainder of the year, potentially influenced by FTX’s plans to liquidate $560 million in Bitcoin. However, given the gentler ascent, a similar measured correction could occur, with a 25% decline to the nearest long-term horizontal support.

Bitcoin’s Recent Resurgence and Technical Analysis

The daily timeframe presents mixed signals, thanks to the juxtaposition of bearish price action and relatively bullish RSI readings.

The price of BTC has retreated since its yearly high of $31,800 on July 13, confined within a descending resistance line. On August 14, the line rejected a breakout attempt (red icon). While a bounce ensued, it failed to reach the resistance line (red circle), indicating that bulls might not have the strength to sustain the rally.

Breaking out from the resistance line could propel BTC to the next resistance at $29,200, representing a 10% increase from the current price. Conversely, a failure to maintain the upward momentum could lead to an 8% drop to the 0.618 Fibonacci retracement support level at $24,300.

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Despite this, the daily RSI offers a predominantly bullish outlook. Although the RSI has yet to surpass the 50 mark, it is on a significant upward trajectory. Furthermore, a bullish divergence has emerged, signifying a momentum increase coinciding with a price decrease. Historically, such divergences have often foreshadowed sharp upward movements, aligning with Bitcoin’s recent performance. Consequently, the RSI lends support to the possibility of an impending breakout.

In conclusion, Bitcoin’s fate hangs in the balance, with the likelihood of a breakout or rejection from the resistance line dictating its future trajectory. Should a breakout occur, an 8% surge is feasible, while a rejection might result in a 10% dip. Traders and enthusiasts will be closely watching to see which way Bitcoin leans in the coming days and weeks.

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