BTC 22 Jan - Medium-term update

BTC broke out of my previous converging triangle. What does that mean?

In my post of 15 Jan, I published a converging triangle and spoke of an impeding breakout. This was the main image I used in that post and its follow-up post on 18 Jan:

After entering the "Breakout Zone" BTC broke out in a downwards direction. This presents a small problem because the breakout wasn't definitive: yes it left the triangle, but not by much (as seen below).

I now see two possible scenarios:

 

Scenario 1: Lower BTC prices

BTC may drop lower yet again - probably to one of the recent previous support levels around $3300 or even $3200.

During the breakout, BTC bounced off a recently established support level at $3480. This level was first formed in mid December (the rectangle on the chart below), but has now been tested twice within the space of about a week (The circles on the chart below). Repeated testing of support levels usually causes erosion of the support holding that level up - resulting in the level collapsing. This is especially true with weak support levels such as this one.

BTC volume has decreased over the last few days, from in the $5 billions to in the $4 billions. This is a strong indicator that we may see another drop soon. Bit Brain's probability of Scenario 1 occurring: 55%

Scenario 2: Another triangle

In the 18 Jan post I stated that:

 

"The lower side of the triangle seems to have been defined. This is not a certainty at this stage – it’s not impossible that a near-future price drop redefines the triangle. I would say that there is about a 65% probability that the triangle is now in it’s final form"

It is possible that the 35% chance that the triangle was not in its final form has now happened. If that is indeed the case, then a new converging triangle must be constructed - more "slightly modified" than "new".

What makes this scenario plausible is that the "breakout" was so small. If this scenario is correct then the old and new triangles will look like the ones constructed below.

The new triangle will also have its own new breakout zone, one which BTC will enter in approximately two days time. If there is a major breakout in a downwards direction then this scenario will be proven false, until then it remains a possibility. It is even very possible that the triangle will need to be modified again later. Once I have better information I will publish an update in this regard (if necessary).

Bit Brain's probability of Scenario 2 occurring: 35%

 

All charts made by Bit Brain with TradingView

Yours in crypto

Bit Brain

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