- Bitcoin has exited a 22-month rising wedge
- The wedge in fact has its roots in the 2018 top but the support line dates back to the March 2020 crash
- Bitcoin needs to hold at $43,000 to spark hopes of an imminent reversal
Bitcoin has fallen out of a 22-month rising wedge following a sharp drop to $43,000. This drop, while not catastrophic in itself, nevertheless represents a weakening in Bitcoin’s structure, needing it to rely on the prior support of $43,000 to hold if an imminent price recovery is on the cards.
Rising Wedge Exit May Not be Bearish
The rising wedge, which is typically a bearish chart pattern, takes in the 2018 top and the March 2020 bottom, with its first serious test coming at the end of November:
A successful defense on that occasion didn’t result in anything more than a stay of execution however, and Bitcoin has finally left the wedge, which in normal circumstances would suggest the end of bullish price action.
However, taking a closer look at lower timeframes things may not be as bad as they seem:
As we can see, this level around $43,000 acted as resistance when Bitcoin first approached it in early 2021 and then again in June 2021. It flipped this to act as support in September and acted as the platform from which Bitcoin bounced to all time highs of $69,000. There is every chance therefore that this is simply the conclusion of the retracement following the run to $69,000 and that Bitcoin will consolidate around this price range once more, given how important a level it is.
Second Bitcoin Rising Wedge Still in Play
There is however a second wedge that is playing about that dates back even further than the one that has just broken, one that in fact has its roots in 2015 and one that we examined in part two weeks ago:
This wedge, which would likely not have been invalidated had it not been for the March 2020 collapse, is some $3,000 away from being invalidated. Falling out of this wedge would also clearly invalidate the $43,000 support and would mean a further period of consolidation before a hopeful return to a bullish structure.