What’s next for bitcoin after topping $100,000, according to the charts

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What’s next for bitcoin after topping $100,000, according to the charts

Bitcoin has finally reached the “the big round number.” After consolidating just below this level in recent weeks, bitcoin has now broken out to another new all-time high above $100,000, leaving investors to consider exactly how much upside we should expect. First, we’ll look at how we got to this point from a technical perspective. Then, we’ll break down two different approaches to identifying the next potential top for the flagship cryptocurrency. Over the past two years, we’ve noted a number of times where bitcoin has experienced such a strong upward thrust and the RSI becomes “extremely overbought,” meaning a reading above 80. When a momentum indicator like RSI reaches this sort of level, it suggests the upside momentum is so strong that the uptrend is likely to continue. We can see examples of this high momentum breakout in January 2023, October 2023, February 2024 and November 2024. In each of these instances, a price breakout on exceptionally strong momentum led to much further gains before an eventual top. Now that we’ve confirmed an upside breakout with positive momentum characteristics, how do we determine an upside target for a chart making new all-time highs? We can either use price projections to look at the price action leading into the breakout to measure a potential upside objective. We can also use trend-following techniques to remain in the uptrend as long as possible. Let’s start with a straightforward measurement technique using the recent consolidation pattern for bitcoin. On bitcoin’s weekly chart, we can see that much of 2024 could be best described as a flag pattern. This classic price pattern involves a countertrend move in which the highs and lows move gently lower in parallel fashion. When the price breaks out of that bull flag pattern to the upside, we can use the trend going into the pattern to calculate a minimum upside objective. In this case, we can measure from the low in the fourth quarter of 2022 to the beginning of the flag pattern in first quarter of this year. If we then assume a similar movement after the pattern is completed, that will imply a minimum upside objective of around $112,000 for bitcoin. We can also use what are called “Fibonacci Extensions” to use the framework of the previous rally phase to calculate upside targets after the breakout. On the same weekly chart of bitcoin, we’ve applied Fibonacci Retracements to the rally from Q4 2022 to Q1 2024. And just as we look at retracement levels between those extremes to identify support and resistance levels, we can also calculate upside projections by looking at the 138.2% level, the 161.8% level and beyond. The most common upside objective in my experience is the 161.8% extension, which in the case of bitcoin suggests an upside target right around $110,000. Notice how well this lines up with the price projection based on the bull flag pattern? In this case we have a “confluence of resistance” where multiple indicators have coalesced to identify a potentially important level as we track the current uptrend. The other way to approach a market making all-time highs is to use trend following techniques to track the uptrend and continue to track the uptrend as long as it continues. Here we’re showing the Chandelier Exit system, popularized by Dr. Alexander Elder in his books on trading techniques. This indicator uses Average True Range to calculate a trailing stop, providing a dynamic trailing stop level that adjusts automatically for the volatility of the instrument. On the daily chart, we can see that, since the breakout in October, we have had a number of pullbacks to the Chandelier Exit but no confirmed closes below this stop loss level. As bitcoin continues to move higher, the uptrend should be considered still in play as long as the price remains above this stop loss on any pullbacks. With bitcoin recently breaking above $100,000 for the first time, investors are right to question the sustainability of the current uptrend. By using technical analysis tools like price projections, Fibonacci Extensions and Chandelier Exits, savvy investors can identify upside targets and confirm that the uptrend is progressing as expected. Based on our analysis of price and trend, the uptrend in bitcoin may be just getting started. David Keller, CMT marketmisbehavior.com DISCLOSURES: Keller owns bitcoin. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.

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