Bitcoin price hesitated at key $12,500 level and started another long-term consolidation. But the spike higher that was quickly retraced to $12,000 is part of a head and shoulders pattern that points to $10,000.
Viewed by many as an alternative to fiat currencies, Bitcoin is more popular than ever. As the Fed keeps printing and signaled the will to let inflation run higher, investors look for alternative options. One such option is Bitcoin.
However, Bitcoin in 2020 is not the Bitcoin you may be used to. In the years since its inception, Bitcoin became the digital currency to go when looking at the crypto space to diversify a portfolio. As such, when Bitcoin price is on the rise, it affects the entire crypto universe.
But in 2020 Bitcoin changed. It looks like a more mature financial asset, moving in a tight correlation with gold. While it looks like a solid development, the tight correlation changed the way Bitcoin behaved as it becomes just another commodity to use for obtaining portfolio diversification benefits.
Bitcoin Price Technical Analysis
Whenever a market pushes for a new high, and then the move is quickly retraced, the first thing to do is to look on the left side of the chart. If you can spot a consolidation, wait for another one to form approximately at the same level. That is how a head and shoulders pattern forms, and this is what the BTCUSD chart shows.
To trade it, wait for a break at the $11,000 and place a stop-loss order at $12,500. Next, use a risk-reward ratio of 1:2 to find out the target – $8,000.
If Bitcoin and gold are so correlated, it means that gold should move lower as well. But as gold is considered mostly an anti-dollar investment, the USD should bounce from its lows too. End of the month flows will drive the price action, and we will find out soon if the head and shoulders pattern on Bitcoin proved to be accurate.