The Chief Investment Officer at Build Asset Management, Matt Dines, has recently identified a classical pattern known as the “Cup and Handle” in the Bitcoin (BTC) price chart. This technical formation has caught the attention of market analysts and traders, as it often signifies a strong bullish signal. In this article, we will delve into the Cup and Handle pattern, its significance in the Bitcoin market, and how it could potentially lead to a rally towards $75,000.
The Cup and Handle pattern is characterized by two distinct parts: the “Cup” and the “Handle.” The Cup part of the pattern resembles a bowl or a rounding bottom and started forming back in March 2022 when the Bitcoin price plummeted below $48,000, setting off one of the longest bear markets for Bitcoin. During this period, the price reached its lowest point at approximately $17,600, establishing a strong support level.
The left side of the pattern depicts a rounded bottom, forming what looks like a cup. This occurs when the price initially declines, consolidates, and eventually starts to rise again. Since hitting its lowest point, Bitcoin’s price has experienced a steady recovery, mimicking the right side of the cup, which indicates a bullish reversal of the previous downtrend.
The Consolidation Phase: The Saucer or Cup
Dines explains that the “saucer” or the cup signifies a consolidation period, a pause in the downward trend, before the price begins to rise back up to test resistance levels. This recovery to the initial resistance line marks the completion of the cup portion of the pattern, which Bitcoin achieved in early January of this year.
Following the recovery, the Cup and Handle pattern features the “Handle,” which is represented by a moderate retracement. This retracement forms a small dip or pullback from the peak and is considered the final consolidation before a breakout. At the end of January, Bitcoin’s price dropped to $38,600, marking the bottom of the pullback. However, with the subsequent breakout above $48,000, the Bitcoin price confirmed the validity of the Cup and Handle pattern.
One essential aspect of the Cup and Handle pattern is the projection from the bottom of the handle. Dines states that the placement of this vertical projection is somewhat subjective, but traders often look for formations on charts. The height of the cup, measured from its low around $17,600 to the resistance line at $48,000, sets the stage for the price target.
Dines suggests that many traders use the height of the cup to set their price target. By adding this height to the bottom of the handle, traders can estimate where the longs who entered on the breakthrough would set their price target. Based on the chart, the height from the cup’s low to the resistance level is approximately $31,973, indicating the increase in Bitcoin’s price from its lowest point to the current level. Applying this height to the handle’s formation suggests a target around $75,000.
Collective Behavior and Price Movement
Dines emphasizes that the collective behavior of market participants will ultimately guide the price movement. He explains that if enough participants put on this trade, setting a retrace at around $75,000, it could become the dominant price action, turning the projected chart into reality. Market participants play a crucial role in price discovery, and their decisions can significantly impact the market’s direction.
The Cup and Handle pattern in Bitcoin’s price chart has caught the attention of traders and analysts alike. The pattern’s resemblance to a cup and rounding bottom on the left side, followed by a retracement on the right side, signals a potential bullish reversal. According to Matt Dines, the height of the cup and the subsequent projection suggests a price target of around $75,000. However, it is important to remember that investing carries risks and conducting thorough research is essential before making any investment decisions.
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