where is bitcoin going.
2024-10-20

Bitcoin on the Verge of a Potential Bullish Breakout: A Strategic Approach to Market Movements

As Bitcoin continues to garner widespread attention in the financial markets, it finds itself approaching a pivotal price range. A breakthrough above the $70,000 to $71,000 level could signal the beginning of a new bullish phase, fundamentally altering the chart structure that has been in place for some time. This price zone serves as a critical threshold, and if Bitcoin manages to decisively close above this range, it would effectively mark the first “higher high” in what could be a prolonged uptrend, thus breaking the previous lower highs formation. The significance of this event cannot be understated as it would indicate a substantial shift in market sentiment and structure.

Why the $70,000-$71,000 Range is Crucial

For technical analysts and traders alike, this $70,000-$71,000 range is more than just a psychological barrier—it represents a key resistance zone that has held firm, preventing Bitcoin from moving higher. A successful move beyond this level would demonstrate that the bulls have regained control of the market, which could set the stage for a potential rally. However, caution is paramount at this stage. While breaking through resistance is a strong bullish indicator, it is important to remember that Bitcoin’s price has already been rising for an extended period—over 75 days—making the market ripe for a possible correction.

Historically, price corrections often follow long rallies, as early buyers take profits and new participants in the market hesitate to jump in at high prices. Therefore, jumping into Bitcoin the moment it breaks $70,000 might not be the best strategy. Instead, a more prudent approach would be to wait for the market to cool off and establish a new support level before considering an entry point.

Strategic Implications: Why Altcoins Hold Better Risk/Reward Potential

Rather than focusing on Bitcoin itself once it breaches this key resistance, our attention should shift towards Altcoins and low-trading pairs or projects. Many Altcoins tend to trade in correlation with Bitcoin but often lag behind in their price movements. This lag creates opportunities for investors who are looking to maximize their risk/reward ratio. Altcoins that are currently trading near support levels or are significantly undervalued compared to their historical highs could offer a more attractive entry point than Bitcoin, especially if the broader crypto market sentiment turns bullish.

It is essential to note that entering Bitcoin at the $70,000-$71,000 level carries significant risks. This is the area where many traders might get caught in a “bull trap,” where a false breakout occurs, leading to a sudden price reversal. Therefore, instead of longing Bitcoin at this point, we look to position ourselves in Altcoins that are trading near support levels, as these assets are likely to experience stronger price appreciation relative to Bitcoin, especially during the early stages of a bullish cycle.

The Importance of Patience: Only Enter After Corrections at Support Levels

Even if Bitcoin breaks through $70,000 and the market sentiment shifts to bullish, it’s important to emphasize that we do not advocate for immediate entry. Given that Bitcoin has been in an upward trajectory for over two months, a correction becomes more probable with each passing day. Smart investors wait for pullbacks and corrections to establish their positions rather than buying into strength at resistance levels.

In essence, the strategy revolves around waiting for Bitcoin to correct back to a support level after the breakout, and only then considering an entry point. Buying at support offers a more favorable risk/reward ratio, as it allows investors to set tighter stop losses while providing greater upside potential during the next wave of bullish momentum.

Understanding the Risks: What Happens if Bitcoin Fails to Hold Above $70,000?

While a move above $70,000 is an encouraging signal, it is crucial to recognize the downside risks if Bitcoin cannot hold above this level for an extended period. Until Bitcoin closes firmly above $74,000, there remains the possibility of a sudden crash or sharp pullback. This scenario is particularly relevant if the price action turns into a false breakout, where Bitcoin rises briefly above resistance only to quickly reverse and plummet below previous support levels.

In such cases, the lower-low scenario would come back into play, suggesting that the recent price movement was a temporary relief rally rather than the start of a new bullish trend. Traders need to be cautious and avoid being overly optimistic until the breakout has been confirmed with sustained price action above critical levels.

A New Map for Market Movements: Removing the Lower-Low Scenario

The one positive change that would emerge from a bullish breakout of the $70,000-$71,000 range is the removal of the lower-low scenario. In technical terms, a break above this range would eliminate the possibility of a continuation of the downtrend that has characterized Bitcoin’s price action in recent months. This shift is significant as it suggests that the market has bottomed out and is now preparing for the next phase of growth.

However, the elimination of the lower-low scenario does not mean that we are in the clear. The focus should still be on identifying strong support levels where price corrections can be used to establish new positions. The key takeaway is that we do not buy into Bitcoin at resistance, but rather wait for it to correct and provide a clearer entry point at support.

Final Thoughts: Staying Ahead in the Crypto Market

Navigating the volatile world of cryptocurrency requires not only technical analysis but also discipline and patience. While Bitcoin’s potential move above $70,000 could open the doors to additional growth, it is important to stay grounded in a well-thought-out strategy. Rather than rushing into the market at a potential breakout, we should remain focused on identifying strong support levels for entry, both in Bitcoin and in undervalued Altcoins.

The crypto market is constantly evolving, and the best opportunities often arise from moments of caution and waiting. As long as we adhere to the principle of entering at support and not resistance, we stand a much better chance of achieving a favorable risk/reward outcome in the long run. Whether Bitcoin soars or stumbles in the coming weeks, the key will be in the timing and execution of our market entries.

For now, Bitcoin remains below the critical levels, and the lower-low scenario is still in play. Only time will tell how the market unfolds, but by adhering to these strategic guidelines, we position ourselves for success regardless of the outcome.

