Over the last six months, Bitcoin (BTC) has been trading in a range that is getting progressively tighter. During this period, prices have ranged from a high of $73,100 to a brief low of $53,960 — as of press time, the world’s largest cryptocurrency has shed 11.78% of its price, taking a notable bite out of the 40.10% year to date (YTD) rise.
In a TradingView post on August 27, technical analysis expert and trader MetaShackle suggested that “BTC is forming an absolutely massive Cup & Handle on the Daily/Weekly chart. There has never been a formation like this in the history of crypto, and it’s sure to be an incredible run to levels that will shock the world.”
What is a cup and handle pattern?
A ‘cup and handle’ is a long-term, bullish chart pattern that traders use to find opportunities when an asset’s price will break out to the upside. Like with all chart patterns, the name is a node to its shape — with the pattern consisting of a ‘cup’ with a rounded bottom, followed by a smaller reversal to the downside which acts as the ‘handle’.
There are a couple of ways to determine how legitimate the pattern is. In general, the more even the cup, the better — and the handle should not retract to more than one-third of the cup’s depth. Should the handle retract to half the cup’s depth, the chart pattern is considered false.
In terms of entry points, traders use a simple rule of thumb — price targets are set by taking the depth of the cup and adding it to the point where the handle breaks its resistance level.
Is a Bitcoin breakout coming?
Although it is too early to tell, MetaShackle’s findings cannot be discounted. The cup and handle pattern is most often used with a weekly trading chart, as MetaShackle has done — and the pattern has been playing out over a long period, with the cup beginning on November 1, 2021, and the handle starting on April 1, 2024.
Should the analyst’s predictions come true, the chart pattern would indeed be a record breaker — accounting for 761% in gains from start to finish. The trader’s price target is set at $130,870 per token, which would represent a 121.32% increase over the asset’s price of $57,850 at the time of publication.
Other researchers, such as Rekt Capital, have highlighted September as a critical time — as this would line up with BTC’s historical tendency to break from consolidation 150 to 160 days after a halving event.
However, investors should still exercise caution — even Rekt Capital has highlighted that September generally being a weak month for Bitcoin could lead to a delay and an eventual October breakout.
#BTC
History suggests that Bitcoin tends to breakout 150-160 days after the Halving
That would mean Bitcoin would breakout from its ReAccumulation Range in late September 2024
That being said, Average Historical Monthly Returns for September are -4.48%, with highest ever… pic.twitter.com/EnEsc8M8O8
— Rekt Capital (@rektcapital) August 31, 2024
Bearish BTC signals
With assets as volatile as BTC, it is crucial to examine countertheses before committing to a course of action. Not everyone shares MetaShackle’s optimistic appraisal of the situation.
Crypto trader Alan Santana made a very bearish case in a TradingView post on September 2, in which he outlined a scenario in which Bitcoin could drop to $43,000 followed by another decrease to $38,000.
Per Santana, the fact that Bitcoin’s moving average (MA) dropped below the 8 / 13 / 21-day exponential moving range (EMA) is a signal so significant that it merits extreme caution. If his predictions do pan out, the handle part of the pattern will retrace to more than 50% of the cup’s depth — invalidating the pattern and possibly changing trading sentiment enough to lead to a sell-off.
Upcoming external catalysts for Bitcoin
On the other hand, not everyone is in agreement — financial analysis company TradingShot laid out a bullish case for BTC breaking past $100,000. Per their TradingView post, two significant upcoming events — US presidential elections and the start of an interest rate cut cycle could provide enough of a catalyst to propel the digital asset to new all-time highs.
While investors should certainly remain cautious, there is little doubt that external factors will play a large role in Bitcoin’s medium to long term price action. A Republican victory would almost certainly bolster bullish sentiment as former president Donald Trump has expressed support for creating a crypto reserve — however, while VP Harris’ stance on cryptocurrencies is as of yet unclear, an upcoming fundraiser hosted by the Blockchain Foundation might serve to foster a positive attitude.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
