However, while many are busy writing off the price of bitcoin, we are also seeing a clear floor persist, with the price repeatedly respecting a zone of support. This could point towards an elevation in volatility, where a sufficient break in either direction could set us up for another strong period of directional volatility following the recent consolidation.
The weekly chart below highlights that the price of bitcoin has held up around a zone which encompasses the 76.4% retracement ($6031), alongside the zone between the November 2017 and February 2018 lows ($5621-$5931). This zone has held for ten months now, and there is a strong chance that this is a floor for the price, as we see a base building phase. On the top end of this downturn, we have also seen nice consistent swings, with lower highs being posted at a relatively stable rate of decline. This consistency is encompassed by the fact that we keep returning back into the region of the descending trendline drawn below. It is also highlighted by the fact that each retracement comes back into the 61.8% region before turning lower once more.
However, with the price approaching the end of this descending triangle formation, we are looking at an increasingly high chance of a breakout in the coming months. From a risk-to-rewards perspective, the bullish side looks most interesting given that we are currently relatively near the support zone, following the sell-off seen last week. If we wanted confirmation of a bullish breakout, we would be looking for a break of the $8481 swing high. Given that we are looking at a clear-cut breakdown level of $5621, for a bearish sell signal we would be looking to hold any such bullish position as long as the price remains above that level. With the price currently trading at $6492, such a breakdown would necessitate a fall of more than $886 (plus spread) from the current price (a 14% drop). Alternately, looking at the potential for a bullish breakout, we would be looking at a rally through $8481 as the bullish breakout signal. That would represent a $1974 rise from the current price. Such a breakout would likely set us up for a sharp period of upside, with the next resistance level being $9957; an increase of $3465 (a rise of over 50%).
Of course, there is a chance that we could see another strong move lower, should the price break below that $5621 mark. However, given the respect we have seen of it thus far, there is a strong case to say that this is a good point to start buying bitcoin once again.
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