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Bitcoin has seen a large tumble in its price since it reached its peak of $70,000, however there are signs that the price may be ready to break out of its downtrend.
With rising inflation and a tense geopolitical climate, growth equities and risk assets have felt the pinch and Bitcoin has been right in the firing line. The collapse of Lunar Coin and shutting down of Celsius services has only added to the fear and capitulation of the cryptocurrency. In fact, the price dropped all the way to a low of $18,000 before finally finding support. The recent rally has been sparked by the easing of inflationary pressures following the resurgence on the Nasdaq and the S&P500. An opportunity has now come up to capitalise on this sentiment and from a reversal pattern that is forming.
Looking at the weekly timeframe, the price is soaking up supply after the initial surge in selling volume. Importantly, after breaking through the 200-week average, the price has reclaimed that level which is positive sign of a reversal. In addition, the volume has been decreasing, indicating that the sellers are reducing and showing that the buyers are beginning to push the price back up. There is a concern that the price may fail to break through the long term down trend as it did in the last rally.
The daily time frame provides additional evidence for a sustained reversal. Firstly, the triangle that is being formed shows a series of higher lows with and smaller retracements as it gets closer to the critical break out point at $25,000. The price has been coiling meaning that the volume is reducing, and the range is getting tighter which could lead to an explosive breakout. As stated in the previous paragraph, a key sign that the reversal can be sustained will not just be the first break out, but also the ability to break out of the down trend. If Bitcoin can break out of the down trend, then a reasonable target in the short to medium term is $33,000.
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