Bitcoins price action gives us a sense of déjà vu, and it’s not the good kind.
If you look at the price swings since early February, a very specific, ominous pattern is forming that is strikingly similar to the setup we saw between November and January. That set-up eventually paved the way for a smashing sale of nearly $60,000.
We are looking at what technical analysts often call a countertrend recovery – a modest bounce within a downtrend.
Here is the diagram. Check the two yellow channels.
The first yellow channel, on the left, shows price action from November 20 to January 20. At the time, bitcoin was trading in a tight range, with a slight upward tilt after falling from $100,000. It looked like the price was recovering, but in reality it was just a pause – or a small bounce – within a larger downtrend.
The result was that the price eventually broke below the bottom of that trading range. Essentially, the level traders had treated as a “floor,” or support, gave way, and bitcoin dived in a straight line from around $90,000 down to nearly $60,000 on February 6.
Now look at the second channel on the right.
Since reaching the lows in early February, bitcoin has once again traded in a narrow range with an upward slope, perfectly contained between these two trend lines.
The similarity to the previous pattern is undeniable. The current relief rally lacks the explosive momentum that the November-January pattern did. It’s a slow, choppy grind upwards. In technical analysis theory, this is a sign of bullish exhaustion, where the market is simply pausing before the bears recharge their engines.
So what?
Charts are not a holy grail and past performance does not guarantee future results. Still, traders use them to read market psychology, and right now they’re telling a tale of a “buy the dip” crowd that lacks strength and conviction.
If bitcoin falls below the lower trendline of its current channel, around $65,800, it could signal a return of bearish control.
The takeaway is that bitcoin is at an important decision point. The bear market may deepen, as some expect, if prices break below the channel formation. If it breaks above the channel, the downtrend may lose steam and the bulls may then make a strong comeback.
