Bitcoin is entering another decisive period after spending recent months trading inside a higher-timeframe ascending range. Technical analysis of the daily chart setup shows the Bitcoin price moving inside an ascending channel structure, but the structure is becoming more dangerous as the cryptocurrency is now approaching its lower boundary.
Bitcoin’s Ascending Channel Is Starting To Look Like A Trap
At the time of writing, Bitcoin is trading around $69,316 after falling almost 5% on the day, with the intraday move showing a drop from $72,926 to a low around the current price. That price action has now locked Bitcoin below the $73,000 to $76,000 zone that acted as a major battleground between buyers and sellers last week.
The concern now is that Bitcoin may be setting up a trap for traders who are chasing a clean continuation pattern without waiting for confirmation. The ascending channel still gives bulls a path back toward $79,000, but the same chart also shows how quickly the setup can turn into a breakdown if support fails.
The daily chart shows Bitcoin building an ascending channel from the February low, with a sequence of higher lows forming across March up until the time of writing. This type of structure can look constructive at first glance because each major pullback has held above the previous one.
However, the problem is that the upper side of the structure has already shown weakness. The structure shows a higher high above $82,000 in early May, but Bitcoin failed to build a stronger continuation from that point. The move eventually rolled over, Bitcoin has returned to the lower side of the channel, and it is now testing whether price action will create a higher low. However, this might be a trap in waiting for bullish traders.
How To Avoid The Trap As Bitcoin Risks A Drop
Many traders may see the green ascending support line and assume that another bounce is automatic, especially because Bitcoin has respected that diagonal several times. Notably, crypto analyst Void is leaning towards a break below the structure, which would turn the higher lows into a failed pattern and open up a dump to anywhere between $54,000 and $58,000.
There are two possible scenarios for how Bitcoin’s price action could play out from this point. If the current support level holds, the rally may continue and push Bitcoin back to $79,000 and possibly return to the region above $80,000. However, if support breaks, Bitcoin could first retest $75,000 as a trap for traders before entering a deeper decline to as low as $54,000.
Therefore, avoiding the trap means not treating the first bounce as proof of recovery, as the Bitcoin price can still produce a short-term rebound to as high as $75,000 in the weak structure.
Featured image from Pixabay, chart from Tradingview.com
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