Bitcoin futures hit key resistance; is a correction imminent?

Today Bitcoin hit its target we were calling last week on the nose. While it is true that we recommended pulling profits last week in an abundance of caution after a variant of a candlestick pattern formed “three river evening star” on a daily chart after coming within $150 of our target for this leg of the rally. That target was $16,309, the 71.8% Fibonacci retracement level coming from a data set spanning the entirety of CME futures and Bitcoin’s all-time high.

Bitcoin has truly come into its own as of recent and has now gained a whopping $12,000 in value since the lows in March. It has risen independently from the markets it was once tethered to which bodes well for its outlook in the near and long-term future.

Bitcoin started this rally in March after a severe crash that brought Bitcoin futures $5,000 lower in a matter of weeks in tandem with U.S. equities that were in reaction to an alarming number of COVID-19 cases in the United States as the country with the largest economy in the world took the lead as the worst-hit nation in the world. Regardless of the flash crash was related to traders losing capital in equities which forced them to sell their Bitcoin positions and were forced liquidated in a snowballing correction as stops were hit, or it was simply bearish sentiment it ended up being a bullish event. This is because it brought the price low enough for long-term, large-scale investors to swoop in and buy up huge amounts of Bitcoin as a speculative trade as well as a hedge against inflation.  Since that point, Bitcoin has shown to be more resilient and profitable in this increasingly digital world than any other regulated market I know of.

Bitcoin has since both recovered faster than the S&P and gold after all three markets fell in a synchronized swan dive that began in February and concluded in March. By May BTC was back at pre-crash levels while the S&P did not recover until August in contrast to gold which hit its record high that same month. Since then Bitcoin has moved independently from both risk-on and even safe-haven assets as it achieved new highs consistently while the S&P struggles to hold onto their new record highs and gold struggles to maintain a level above $1,800. Setting Bitcoin up for a chance to make a new record all-time high by next year's end.

But even though all the stars have aligned for the worlds largest digital currency to be more productive than the markets it once shadowed next year as a technician first and a believer second, I am hesitant to buy a market that at this point has gained over 60% in value without a correction of any sort. To me buying the break now would go against too many cardinal guidelines I hold in high regard as a technician. The risk/reward ratio is far too high to recommend buying an overbought market regardless of my high expectations and outlook for future growth.