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Bitcoin (BTC) Paints Critical Pattern: Is Rally Over?

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Thu, 6/06/2024 - 9:45
Bitcoin (BTC) Paints Critical Pattern: Is Rally Over?
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Bitcoin broke through the $70,000 barrier, a massive milestone, but not everything is so great. That being said,  traders should be aware of a potentially dangerous pattern that is developing on the chart: a double top pattern around the $71,900 mark. 

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What exactly is a double top pattern? Generally speaking, this pattern is interpreted as a bearish reversal signal, suggesting that the asset may find it difficult to continue rising. It develops when the price reaches a peak, falls, then rises to the peak once more before beginning to decline.

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BTC/USD Chart by TradingView

The bullish momentum appears to be waning, as indicated by this double peak and a downward trend may ensue. The price of Bitcoin tried to rise after reaching $70,000, but it encountered resistance close to $71,900, as can be seen in the current chart.

The completion of the double top formation by Bitcoin might indicate the end of the current rally if it is unable to overcome this resistance and retreats. This cautious outlook is supported by a number of indicators. According to the RSI, a price correction is typically preceded by overbought levels, which Bitcoin is approaching. 

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Furthermore, the volume did not increase all that much during the most recent upward move, which may indicate that the buying pressure is waning. However, do not forget the larger picture. Even in spite of these red flags, in the past, Bitcoin has consistently displayed bullish behavior and resilience, frequently challenging technical analysis patterns.

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Institutional interest and widespread adoption are both growing and the market sentiment at the moment is still mainly positive, thanks to the ETF. Traders need to be on guard. The double top pattern may be confirmed and a possible decline in price could result if Bitcoin breaks below the $70,000 support level.  

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