A key price pattern has emerged on bitcoin’s (BTC) price chart, hinting at a potential pullback ahead.
The cryptocurrency has rallied from $60,000 to new record highs above $70,000 in less than two weeks. The ascent has taken the shape of a “rising wedge,” which is a bearish pattern, according to technical analysis theory.
“Normally rising wedges resolve bearish,” crypto analyst and trader Josh Olszewicz told CoinDesk, explaining a possibility of a typical bull market pullback ahead.
A rising wedge pattern comprises upward-sloping trendlines that connect highs and lows and converge toward a single point known as the apex. The converging nature of trendlines indicates a steady weakening of bullish momentum. Thus, an eventual wedge breakdown, or the move below the trendline connecting lows, represents a bearish development, paving the way for deeper price losses.
Other indicators like the 10-day rate of change, which measures how rapidly prices are surging or falling over 10 days, have decoupled from the rising prices.
The divergence suggests a downside momentum is building and often foreshadows price pullbacks. 20% or more pullbacks were common during the 2017 and 2020-21 bull markets.
However, Olszewicz expects the pullback to be short-lived. “Given the ETF inflows coming in and MicroStrategy’s Saylor continuing to buy more, I think even if prices do retrace after potential wedge breakdown, it will be hard for the bears to keep them under pressure for long,” Olszewicz explained.
