On the Bitcoin daily chart, a "triangle" pattern has been forming within the $18.6k–$20.4k range for more than two weeks. Bulls and bears made unsuccessful attempts to go beyond the corridor. Investor efforts have failed due to a combination of factors.
Trading volumes, the movement of stock indices and DXY did not give Bitcoin a chance to go beyond the range. However, following the results of October 25, the cryptocurrency formed a bullish engulfing pattern and consolidated above the $20k level.
As of October 26, Bitcoin has risen in price by 7% per day and reached the level of $20.6k. Trading volumes skyrocketed to $60 billion and an upward spurt in the price of BTC triggered $800 million in short liquidations. The cryptocurrency continues to hold the $20.4k level and is looking to break out of the downward trend line.
Reasons
As we have already said, BTC's successful exit beyond the $18.6k–$20.4k range was made possible by a combination of macroeconomic and internal factors. The most obvious reason was the formation of the "triangle" pattern, which, sooner or later, was supposed to provoke a surge in volatility.
Bitcoin was helped by the "triangle" on the daily chart of the US dollar index. Most of the experts predicted the upward direction of DXY to break the pattern after the statements of the members of the Fed about the adherence to the hawkish policy.
However, DXY broke out of the triangle downwards and as of October 26 reached support at 110. According to technical indicators, buying activity around DXY is increasing, but it is likely to make local consolidation near 110.
The stock market is in the bull period of the current trading season. The main indices started an upward movement a few days ago, and the crypto market began to grow in pursuit. The correlation of BTC and SPX is starting to grow again, which has a positive effect on the bullish potential of the cryptocurrency.
According to the latest statistics, US analysts have come to the conclusion that the Fed is exerting excessive pressure on the economy. Such conclusions were perceived as a signal for local easing of monetary policy.
BTC/USD Analysis
Bitcoin has made a bullish spurt outside the "triangle" and consolidated above $20k. At the same time, there was a forced liquidation of short positions, which allowed the cryptocurrency to continue its upward movement to a key resistance level.
As of writing, the upward movement of Bitcoin has stopped near the $20.4k–$20.6k area, where the downward trend line passes. There is an activation of sellers and attempts to squeeze out buyers below $20.4k. The main range has already been broken, but in order to move to $23k, it is necessary to gain a foothold above $20.6k.
Technical metrics are bullish: RSI and Stochastic indicate bullish sentiment and high buying activity. The MACD indicator is preparing to enter the green zone, which confirms the formation of a medium-term bullish trend.
To continue moving towards $22.8k–$23.4k, the cryptocurrency needs to gain a foothold above $20.6k by the end of the trading day. After the opening of the American markets and the dynamics of the movement of stock indices, the prospects for Bitcoin will become clear. Until then, the upward potential of the cryptocurrency has been exhausted and consolidation is required.
Results
With a favorable development of the situation in the stock market, Bitcoin is able to continue its upward movement towards $23k. However, there are no prospects for medium-term price growth. The correction in the DXY index is a temporary phenomenon, and, according to forecasts, the markets are preparing for a 75 bps rate hike on November 2.
In addition, we must not forget that serious reserves of liquidity are concentrated not far from the local bottom. The current upward movement will likely end within $25k, after which the asset will go to update the local bottom.
