Bitcoin Sitting in Five-month Wedge After Drop
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- Bitcoin is sitting within a five-month wedge following its drop to $42,800
- The loss of $45,000 is concerning but not critical
- The retest of this area will tell us a lot about Bitcoin’s short term strength
Bitcoin is now sitting in a wedge structure dating back to the November 2021 high following its drop to $42,800 yesterday. The drop, which took Bitcoin back under the crucial $45,000 area of support it looked to have breached, sets up the possibility of a fall to the $40,000 area, with the wedge itself likely to have a big impact on Bitcon’s short term health.
Wedge Dates Back to November 2021 High
As we can see, the recent jump to the $48,000 has not been maintained, and the $5,000 fall since that level has acted as a line of resistance dating back to the November 2021 high:
The support line of the wedge has been provided by the constant frontrunning of bids in the $30,000-$34,000 region, which has seen Bitcoin putting in higher lows. Using this wedge structure we can see that, despite the $45,000 support level having been breached, Bitcoin can come down to the support level and still be able to be bullish.
Of course, with a symmetrical wedge pattern like this we can’t tell which way price will break out, but we can look to the buy volume this year for an indication – the lows have been bought up with great volume, and the majority of the daily volume candles in 2022 have been green.
Bitcoin Needs to Regain $45,000
If we were to ignore the wedge for a moment, we can also look at the situation regarding support and resistance levels. The drop to the $43,000 region needs bulls to overcome the $45,000 region again for continuation to occur. If this level acts as resistance we could see the following play out:
If this is just a fakeout and we are set for instant upside, something like this needs to play out:
Whichever scenario plays out, it is clear that the price action around $45,000 is going to be critical to Bitcoin’s short term direction.