Key Highlights:
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Bitcoin’s price action confirms a breakout from an inverted head and shoulders pattern.
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A potential retracement towards the $114,000 to $115,000 range could test previous resistance as a new support level.
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The MVRV Z-Score’s current level indicates that Bitcoin’s upward momentum may continue, as it is significantly below historical peak values.
Bitcoin (BTC) appears to have broken out of a pattern frequently observed by technical analysts as a signal of a “bullish trend reversal,” potentially setting the stage for a price increase towards $160,000.
Potential Dip Before Further Ascent?
An inverted head and shoulders (IH&S) formation has been observed on Bitcoin’s 3-day and weekly price charts.
A recent surge above the neckline resistance around $113,000 validates this pattern, suggesting a projected price target of at least $140,000, according to the insights from analyst Merlijn the Trader.
Meanwhile, well-known analyst Trader Tardigrade foresees an even more substantial increase, pointing to a similar IH&S pattern on the weekly chart, albeit with a slightly higher target.
His analysis suggests that Bitcoin’s price could potentially reach approximately $160,000, based on the predicted target of the reversal pattern.
Following a recent peak near $123,250, Bitcoin is currently experiencing a slight correction, declining by approximately 5.65%, potentially due to overbought conditions.
This decline comes after a period of significant gains, with Bitcoin’s daily relative strength index (RSI) recently surpassing 70, suggesting a possible exhaustion of buying pressure in the short term.
Blockchain data indicates that profit-taking activity is also contributing to the current price movement. Major Bitcoin holders, including both long-term and short-term investors, are apparently securing profits, increasing the selling pressure.
Related: Early Bitcoin Holder Transfers $4.6 Billion After 14 Years
Analyst Hardy suggests that Bitcoin may retest the CME gap between $114,300 and $115,600 to validate it as a new support zone before continuing its upward trajectory.
This price range closely aligns with the neckline of the identified IH&S pattern.
It’s typical for prices to retrace to the breakout area—where previous resistance becomes support—before the trend resumes. This often serves to eliminate weaker positions and solidify the foundation for future growth.
A successful bounce from this neckline area could strengthen the case for Bitcoin’s potential rise towards the $140,000-$160,000 targets during August or September.
Bitcoin Not Yet Overheated, MVRV Z-Score Indicates
Despite Bitcoin’s proximity to its all-time highs, its MVRV Z-Score remains considerably below levels historically associated with market peaks, suggesting that the current bullish trend might have further to climb.
The MVRV Z-Score assesses the variance between Bitcoin’s market capitalization and its realized value, an estimate of the capital invested in the network.
Historically, when market value significantly exceeds realized value, the score enters the red zone, indicating overvaluation and often preceding major market corrections.
This implies that, from an on-chain analytics perspective, Bitcoin’s current situation does not suggest an overextended market, and further price increases are possible before a classic market top formation occurs. This potentially allows it to reach the IH&S pattern’s target of $160,000 by August or September.
This article is for informational purposes only and does not provide financial advice. Investing and trading involve risks, and readers are advised to conduct thorough research before making any decisions.