Bitcoin Price Struggles Above $38,000 As Buying Momentum Fades

Summary:

Since May's crypto crash, the Bitcoin price has been trading in a narrowing range. The latest failure to break higher suggests $34,600 may be next.

Since May’s crypto crash, the Bitcoin price has been trading in a narrowing range. The latest failure to break higher suggests $34,600 may be next.

The cryptocurrency market has found itself in a state of disarray recently. The start of 2021 was a fertile hunting ground for the Bulls. Bitcoin’s rally to just under $65,000 dragged the whole ecosystem higher.

Just as the Bitcoin price set a new record in 2020, many altcoins followed suit. In the aftermath of the huge declines in May, the bigger picture has become slightly blurred. But, plenty of opportunities have arisen for trading the range.

Bitcoin Price Action Post-Crash

On May the 19th, BTC/USD dropped -30% in a violent sell-off. The price briefly touched $30,000 before snapping back to $42,990.

In the two weeks following, the price has not traded outside of these parameters, spending most of the time gyrating either side of the range’s $36,495 mid-price.

The trading range has been gradually getting smaller over time. This has resulted in a pennant forming on the chart. This formation is typical of a market struggling for a catalyst. This is also evident by the drop-off in trading volume over the period.

The Bitcoin price was traded down to $34.650 Sunday before bouncing from the rising trend line at the lower end of the formation. The rally that followed took the price to $38,208, just short of the descending trend line at $38,495.

The price action has again stayed true to the recent range, and in the last 24-hours, BTC/USD has drifted lower from resistance to $37,475.

The top of the range is now at $38,355, and as long as the price is below that, it remains vulnerable to the downside. If the pattern continues, the next leg should be lower towards the bottom end of the channel at $34,600.

However, when a price breaks out of a narrowing range, it often results in a move of a large magnitude. Therefore, short positions entered into around here should be stopped out on a break above $38,355.

Clearance of the trend line resistance would suggest the price may have finally broken out and target the $42,990 top of the May 19th bounce.