What’s Next For Bitcoin – $56k Or $16k?

Bitcoin traders and enthusiasts are riding the wave after the incredible rally from $9,000 to $42,000 throughout Q4:2020. It certainly was an incredible run – more than quadrupling in value in less than three months. Now we find ourselves in an early 2021 corrective phase which will end in either another Breakout/Rally attempt or an Excess Phase (Blow-off) Top. This article highlights both potential outcomes because at this stage it is difficult to determine a single high-probability outcome.

WHAT A BITCOIN BREAKOUT WOULD LOOK LIKE

Let’s take a look at what a Breakout/Rally technical setup in Bitcoin would look like in the near future. Looking at the chart below, price must hold above critical support near $27,800 as any new lower low would constitute a continuation of the Bearish downtrend. Therefore, any renewed rally attempt would likely initiate from levels near $28k (or just below this level). 

Using a Fibonacci Price Extension, we can see the $42,280 (0.618) and the $56,190 (1.0) Fibonacci Extension levels are key potential upside price targets if a breakout/rally resumes. We are measuring the most recent bottom, in late November, to the current high price level, then aligning the Fibonacci price extension bottom to the current price lows (near $30,260). This allows us to see future potential price target levels if this rally/uptrend continues.

(Click on image to enlarge)

Again, it is critical that the support level near $27,800 holds and price lows do not breach this level. Any breach of this support level would constitute a “new lower low” in Fibonacci Price Theory – which suggests a downtrend is continuing.

WHAT A BITCOIN BREAKDOWN WOULD LOOK LIKE

The opposite aspect of this recent peak is that it may be setting up as an Excess Phase (blow-off) Top, as we can see the #1 (extreme rally) and #2 (sideways flag) setup in price recently. The completed Excess Phase pattern consists of five total processes:

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