Market Analysis

Bitcoin to 17,000?

It’s been a while since I’ve written about Bitcoin and for good reason: Bitcoin was stuck in a consolidation range for 3 months and the question was whether BTC could break out of a larger technical pattern we’ve been tracking which it finally did last week and this breakout is notable for it ay have further price implications.
Indeed the breakout, following the consolidation and surrounding technical construct, may point toward a technical target of 17,000.

Let’s review briefly.

This is the chart I’ve been tracking since May on Twitter:

I pointed to a tightening pattern that suggested a key decision in the price action in 2020.

And we followed the consolidation period in the thread for months until the breakout in late July:

So now that we have the breakout what now?

Firstly note that a breakout is bullish if it can be successfully defended, meaning as long as $BTC can remain above the breakout trend line it has significant technical room higher:

Also note $BTC is showing some retracement action and has room lower for a potential retest of the trend line.

But note that inside the larger wedge consolidation a potentially much more bullish pattern has emerged, that of a potential inverse which would point to near 17,000:

This pattern would suggest a move back toward the 2018 highs in due time.

When would this pattern be invalidated? If BTC fails to defend the breakout meaning a fall below the inverse neckline and the trend line (see pink circle).

One thing about patterns is they signal probability, but one also must know when patterns are invalidated and where one may want to place stops.

As it stands $BTC has rallied 37% since the structure was outlined in May. Now it has to prove the breakout and the potential inverse pattern and, if it does, it’s on its way to $17,000.

On a final and separate note though: I’ve heard a lot of talk in the past couple of years of how BTC is a hedge against fiat currency by central banks. I can’t say that it isn’t, but I will point out that to my eye at the moment it looks like BTC is more in line in tracking the overall market:

Who’s leading whom here? Or are both simply an expression of speculative sentiment in markets driven by unprecedented central bank liquidity? Not for me to decide.  But to the extent that BTC and markets continue to track somewhat in parallel then a bullish outlook for BTC would suggest further bullish price action in $SPX.

A true test for BTC as a hedge against fiat currency destruction in my view would be to see both decoupling from each other. For example: A drop in equities while BTC races toward the 17K technical target. That might convince to support the argument. As it stands BTC dropped along with everything else during the February/March 2020 Covid crash so the hedge argument remains unproven from my perch. Indeed if markets were to drop and BTC along with it again invalidating the inverse pattern and breakout may indeed put the hedge argument to bed. We’ll likely know more on that front in the next 3 months or so.

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Categories: Market Analysis

10 replies »

  1. Everything is breaking out..stocks, gold, silver, bonds, bitcoin. Even oil had a nice run.

    i think it’s time to short everything.

    • Gold and silver should boom after a crash if it happens, look how quickly they recovered last time, and made new highs, unlike stocks. Bank stocks should be the safest.

  2. “We the people..” has become “we the corporation”.
    The ‘people’ need the government to do their jobs.. breakup monopolies, ban corporate lobbyist, ban corporate campaign contributions, etc.

  3. Final capitulation in SOXS, TECS, SQQQ, etc. ‘Buy, Buy, Buy’ ala Cramer but this time the inverse ETF’s.

  4. ‘Democrats introduce bill to require the Federal Reserve to reduce racial inequality.’

    We need a bill that prohibits a company from paying dividends or buying back stock unless all employees of the corporation are granted the same number of equity based compensation. That way all employees benefit equally in the change in the stock prices when dividends and buybacks made.

  5. We need to vote against all incumbents and continue every two years until we get politicians in the office that put the people first (not corporations).

  6. Corporations are responsible for wealth inequality. We need the SEC to come up with new regulations and oversight of corporations. So many corporate employee benefit plans have been created to disproportionately benefit management employees rather than all employees equally.

    What is needed is equality in stock based compensation, 401K contributions, pensions, bonuses, vacation balances, health insurance. All these scale type employee benefit plans were created by management to benefit management more than all other employees.

  7. Uhh, maybe you should be coveing gold and silver. Real things with real value that are out-performing. Bitcoin can be any value that you want it to be. Any scarcity of bitcoins is self-imposed. If it becomes too popular the governments of the world will close it down.


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