Bitcoin has successfully pushed above long-term overhead resistance from the bull flag formation that has been in place since March, making a new local high at $69,487. For those who have been patiently holding onto their Bitcoin, this is a significant milestone, marking a potential turning point in the market. But as always, with great rallies come important retracements that can set the stage for future growth.
Bull Flag Breakout: What Happens Next?
Bitcoin's breakout above the bull flag is a textbook move, but I fully expect the price to retrace to the newly broken resistance line and bounce off it, solidifying it as support. While this pattern doesn't require a pullback to confirm the breakout, I'm anticipating a short-term retracement for two main reasons:
- The current rally appears to lack strong volume, meaning that without real buying pressure, Bitcoin could become exhausted and temporarily fall back.
- Healthy pullbacks are essential for any strongly trending market. They act as a "reset," giving the market room to breathe before moving higher.
Pullbacks are not a reason to worry—they are an opportunity. For those experiencing FOMO (Fear of Missing Out), a pullback can offer a chance to enter or re-enter the market at more favorable prices. As Bitcoin consolidates its gains, we may see a drop to the newly established support zone around $65,426, aligning closely with the TBO Fast line and slightly above the upper resistance line of the bull flag.
Understanding Bitcoin's RSI and Volume
One of the key indicators to watch during this phase is Bitcoin's Relative Strength Index (RSI). Bitcoin has now experienced a 6-day streak with RSI above 70, signaling that the market is becoming overbought. For context, during Bitcoin's highly bullish run in October 2023, RSI remained over 70 for 24 consecutive days, peaking at an insane 95.40. While we are not quite there yet, the current streak suggests Bitcoin may need to cool off soon, which would explain the anticipated pullback.
For Bitcoin to continue its upward momentum, we need to see more buying volume come in. Without that, there's a higher likelihood that Bitcoin could retrace to $65K before making another attempt to push higher.
Dominance Levels: Bitcoin Dominance vs. Stablecoin Dominance
As Bitcoin surges, it's essential to keep an eye on dominance levels. Bitcoin dominance has been a key driver of the market recently, but we're starting to see a retrace. When Bitcoin dominance pulls back, it usually signals that altcoins could perform better against Bitcoin. However, the rise in stablecoin dominance is throwing a wrench into this setup.
Stablecoin dominance increased during Bitcoin's pullback, and as we know, when stablecoin dominance rises, it typically means that traders are moving into safer assets like stablecoins in response to Bitcoin's price action. This is why many altcoins have overreacted to Bitcoin's small pullback, falling harder than BTC. This dynamic, known as the "multiple factor effect," often results in altcoins dropping 1.5x to 2x more than Bitcoin during corrections.
If stablecoin dominance continues to rise and pierces key resistance, we may see further downward pressure on Bitcoin and altcoins. However, my long-term view remains bullish, and I still expect stablecoin dominance to trend lower, signaling more strength for Bitcoin.
The Bigger Picture for Bitcoin and Market Opportunities
As Bitcoin moves through this pullback phase, it's essential to remember that retracements are a natural and healthy part of any rally. They provide opportunities for traders and investors to find new entries, especially in a market as volatile as crypto. Volatility is the lifeblood of the market, and those who can identify strong charts with solid fundamentals during pullbacks can position themselves for success when the market moves higher again.
While Bitcoin is undergoing a slight pullback, stablecoin dominance is rising, and Bitcoin dominance is retracing. This combination suggests that most altcoins are underperforming relative to Bitcoin. However, when Bitcoin and stablecoin dominance both pull back, that will be the ideal time to trade altcoins against Bitcoin. For now, the focus should remain on Bitcoin's retracement to the $65K level, with potential support providing a strong foundation for the next leg up.
Bitcoin's Next Moves and What to Expect
Bitcoin's breakout above long-term resistance is a positive sign for the market, but the current lack of volume suggests we may see a short-term pullback. A retracement to $65K would be a healthy correction and offer new buying opportunities for those looking to enter the market. Dominance levels are also shifting, with Bitcoin dominance retracing and stablecoin dominance on the rise.
As always, traders should remain cautious but also look for opportunities during these pullbacks. Healthy corrections provide the best chances to re-enter strong positions, especially as the market continues its broader bullish trend. Keep an eye on dominance levels and volume, as they will be key indicators of what's to come for Bitcoin and the broader crypto market.