Where will Bitcoin’s rally conclude?
With 2020 finally over a lot of things are pointing to the possibility that BTC’s rally is also coming to a wrap. The majority of the technical studies that are predicting the end of this rally or at least this leg of it come from Fibonacci extensions and wave theory. One of the more obscure indications is from a candlestick pattern called ‘three gaps’ where you get four green candles with upside gaps between all of them. This rare pattern signals the exhaustion of a trend and hints at a market’s reversal. Although the traditional format is drawn as four white candles containing three gaps, in real market data this formation is extremely scarce however a variant is visible in BTC. The first gap came in between Dec. 11th – 14th, the second the weekend of Christmas Dec.24th – 26th, and the last one popping up today between Dec. 31st – Jan. 3rd. Now the last gap was filled today, these all were weekend gaps in between multiple candles nonetheless it tells us along with other indicators I use that are leading indicators.
The other study suggesting a top forming in the market is a Fibonacci extension of the entire rally in 2019 from roughly $3,000 to $14,000 and starting at the lows in March at $4,200. This gives us a 2.618% extension of $32,958 suggesting the rally is at a logical conclusion point before a period of correction or consolidation. More than likely a correction will be what follows this exhaustion of a trend, and this extension gives hint to where that correction may lead us.
The 1.618% extension sits at $21,985 and on December 21st the week after reaching the 1.618% retracement this level was retested and proved it had turned to a level of support and was the exact low of the following week.
Another retracement among others backs up these numbers giving both data sets more credence. This retracement is from the previous record high at $20,000 to the bottom at $3,000. The first thing to notice is how the 61.8% retracement matches closely to 2019’s apex, but relevant to our question of where will we see the current rally conclude is the 1.618% Fibonacci level which comes in at $30,400.
This Fib retracement also harmonizes with the next top to bottom ($14,000 - $4,200). The 1.618 level of this Fibonacci level comes in at around $20,000 and the 2.168 level appears at $30,000, the same as the older Fib’s 1.168%. All of these technical studies are screaming “LOOK HERE FOR REVERSAL OF TREND!”.
These leading studies are all concise and call for a conclusion to the rally at the $30,000 area, followed by a possible correction to $22,000.
The final technical feature that foreshadows a fall in the world’s number one digital currency comes from Elliott wave theory and we will discuss it in our next published study until then I want to summarize what the charts are saying, we may trade as high as $34,000 but I see $30,000 as the conclusion of the rally that began in March of 2020 based on technical indicators. Fundamentally a pause is also warranted but also points toward prices reaching from $40,000 - $50,000 by the end of 2021.
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