Dubbed Broadening Formation, the megaphone-shaped pattern appears when price moves inside two divergent trend lines. Investopedia says an enlargement formation represents disagreement over the next potential bias among investors. As a result, the price forms higher intermediate peaks and lower intermediate lows.
Bitcoin appears to be trading inside a similar structure, as shown in the chart below. Nonetheless, the cryptocurrency lacks volatility, which is one of the main features of the expansion of the training model.
If the pattern recurs, the price of Bitcoin will experience a bullish breakout above the upper trendline of the structure.
In doing so, it would expect to increase by as much as the maximum height between the upper and lower trendline of the expanding formation. The bullish pattern appears because traders interpret the widening formation as a trend reversal pattern.
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But until then, the pattern offers swing trading opportunities for daytraders, i.e. a bounce from the lower trendline tends to present long opportunities towards the upper trendline, and a pullback from the upper trendline could cause traders to open short positions towards the lower line.
Again, Bitcoin’s price volatility is lower enough to invalidate such intra-range configurations.
The most intermediate resistance level is near the dotted trendline in the Bitcoin chart below.
A close above the dotted trendline expects Bitcoin to test $ 35,000 as the next resistance target. On a prolonged upward move, the potential to hit $ 40,000 is higher based on recent cryptocurrency pricing patterns.
Conversely, a retreat from the dotted trendline tends to validate a falling channel pattern. On the other hand, Bitcoin could retrace its steps further down to the so-called Broadening Wedge support trendline (next downside target near $ 28,500).
Bitcoin Price Fundamentals
Conflicting Bitcoin setups emerge as bulls continue to defend $ 30,000 as support while bears control the $ 34,000- $ 35,000 area. Unfortunately, this has put the BTC price in a tight trading range, giving no intermediate clue as to where it wants to go next.
Fundamentals have played a key role in trapping Bitcoin prices. On the upside, inflationary pressures from the traditional financial sector provided favorable winds for Bitcoin’s safe-haven narrative. Meanwhile, the downside is an increasingly global regulatory discontent with the cryptocurrency industry.
Related: SEC Chairman Says Cryptocurrency Falls Under Security-Based Trading Rules
Over the past two months, the market has seen China ban cryptocurrency trading, India plunder the regional crypto exchange WazirX, and the UK ban the Binance affiliate from operating regulated businesses. In addition, Japan and Hong Kong have also issued warnings and restrictions against Binance.
Earlier this week, U.S. state authorities shut down the accounts of crypto firm BlockFi, alleging the startup had sold unregistered securities. The industry has also been criticized for increasing the carbon footprint through mining, which requires significant computing power to run blockchains.
“Until global cryptocurrency regulations are relaxed or a resolution is reached, I think it’s difficult to gain public trust and Bitcoin reaches the heights it reached at the start of this year. 2021, ”Adam Todd, Founder and CEO of Digitex, said Cointelegraph.
JG Collins, director of Stuyvesant Square Consultancy, also wrote in his Seeking Alpha editorial that “National economic regulators, state environmental regulators and municipalities troubled by rising local electricity tariffs are going to sweep cryptos away as a tsunami ”.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.