Bitcoin’s price chart has transformed into a technical “bull flag” pattern, signaling an imminent breakout to new all-time highs. Over just over six and a half weeks between April 8 and May 22, Bitcoin shot up from approximately $74,700. It hit an all-time record high of almost $111,900. After that price surge, the cryptocurrency has been moving sideways in a mild downward trend, creating the bull flag.
According to technical analysts, a particularly strong move above $109,000 would provide confirmation that the bearish breakout would indeed be bullish for Bitcoin. If this breakout happens, it would open the door for a retest of the $146,000 high. This target is calculated by adding the length of the pole, which embodies the initial surge, to the breakout point. This simple calculation is often referred to as a measured move.
The flag formation simply draws trendlines connecting the highs from May 22 and June 9. It further connects the bottom of June 5 and June 22. The significance of the pole is marked by the first peak in Bitcoin’s price.
"Flag formations occur over a short period — usually a few days to few weeks" - Charles D. Kirkpatrick.
Although the bullish scenario of a rally returning to $140,000 and higher is possible, analysts recommend that traders should watch price action closely. Generally favorable bullish breakouts have low failure rates. If prices break downwards of the flag, a bearish reversal could occur.
"[However], it is important to be cautious to make sure that a complete formation has occurred and to wait for the breakout" - Charles D. Kirkpatrick.
A rejected bullish breakout is still a potential outcome, underscoring the importance of keeping a close eye on Bitcoin’s price action.
Omkar Godbole, Co-Managing Editor on CoinDesk's Markets team and a Chartered Market Technician (CMT) member, provides daily technical analysis of Bitcoin.
