Bitcoin holders have recently breathed a sigh of relief. After reaching an all-time high in 2021, Bitcoin entered a bear market and fell throughout 2022.
Last year, sentiment around Bitcoin was overwhelmingly negative — driven by headwinds across the cryptocurrency industry and a broadly stronger US dollar.
But observers who focused on technical details noticed encouraging signs over the past few months. First, the market formed a falling wedge pattern, a bullish reversal pattern. Second, the Relative Strength Index (RSI), one of the most reliable momentum indicators, has shown bullish divergence since the final quarter of 2022. Third, the current rally is approaching a key resistance zone that could prove pivotal for further gains.
BTCUSD chart source: TradingView
Falling wedge confirms a reversal
During the recent upswing, Bitcoin climbed back above $20,000 for the first time since November of last year. That move triggered sizable liquidations of short positions in the crypto market, exceeding $100 million during last week’s trading.
In other words, the rally caught many bearish traders off guard.
Technical traders had identified the potential falling wedge pattern shown above. Until the market broke the pattern’s upper trendline, it was difficult to conclude that a reversal was fully in place.
Now that the breakout has occurred, and so long as recent lows hold, the outlook remains bullish for Bitcoin.
RSI bullish divergence has been present for months
Another bullish indicator comes from the RSI. The red-marked bullish divergence signaled a possible reversal. Combined with the falling wedge setup, this added another technical reason to be optimistic over the past several months.
$30,000 matters for Bitcoin bulls
The pressing question now is: what happens next? From a technical perspective, Bitcoin’s path is relatively straightforward.
If price continues to stay above the falling wedge lows, it can test the resistance area near $30,000. Historically this level has acted as strong support and resistance, so a decisive break above $30,000 could trigger a larger rally.