Bitcoin is the hot topic of discussion these days. Years ago, there was a chain store called Hot Topic for punk/goth rockers. Rock n' Roll High School. The bitcoin bulls have been calling the bottom in the cyber currency ever since it started puking after Keystone identified the top.
The top call was simple as Keystone explained. The red rising wedge is a bearish pattern. The red lines clearly show universal negative divergence on the weekly basis as price makes a higher high. She was cooked. That was the crescendo up at 125K. Bitcoin was overbot and the upper band was violated wanting a move back to the middle and lower bands. A real easy top call but as usual, no one wanted to believe the joy would end, especially the bitcoin bulls. But alas, the neggie d spankdown occurs and now bitcoin enthusiasts are sitting at the local bar drowning sorrows. Play me a song, Mister Piano Man.
The tight bands (blue arrows) told you a huge price move was about to occur on the weekly basis but the squeeze does not predict direction. Barring any happy talk news, the neggie d told the path forward and it was down the rabbit hole.
The pink lines show a potential 2-leg bear flag that may materialize. It is textbook so far the first leg from 125K to 85K that is a drop of 40K. The sideways consolidation occurs, using the 100-wk MA as support for almost 3 months, wow, and price has upwards buoyancy, it is textbook for the 2-leg bear flag pattern. The second leg begins at 95K, you can plug in your own numbers and see what you get, so the downside target to satisfy the pattern is 55K. That 100-wk MA at 87K is important; pay attention to it.
The purple lines in that spaghetti above show a H&S pattern with head at 125K and neckline at 83K so that is 42K difference. If the neckline fails, and it did, the downside target is 83K minus 42K or 41K. This downside target is the congestion zone at the end of 2023 and start of 2024.
The task now is to find the tradeable bottom on the weekly chart. The daily chart is set up with positive divergence right now and would be agreeable to a recovery rally. The daily chart may wait for the weekly chart to set up so they can then both send bitcoin higher on a sustainable multi-week rally. As price makes the lower low, the weekly chart indicators can be checked to see if positive divergence is in play (to call a bottom), or not.
The histogram and money flow are agreeable to a bounce in bitcoin going forward on the weekly basis. However, the red lines show a weak and bleak RSI, MACD and stochastics. The stochastics are in the cellar so that can be called possie d. Also, the stochastics and RSI are dipping into oversold territory so they will be agreeable to a relief rally.
The weak and bleak RSI and MACD have to turn possie d to call the bottom in bitcoin on the weekly basis. Thus, mathematicians say thus a lot, that is why we are never invited to the holiday parties, the chart needs a week or three to set up properly for the bottom. It does not mean it cannot rally before then but there is no need to guess or be a hero, simply wait for possie d and you will know the bottom is in.
Recapping, the 2-leg bear flag pattern targets 55K. The H&S targets 41K. These targets seem excessive with the chart almost set up with possie d. However, the monthly chart is a piece of garbage, negative as could be, wanting more negativity on the long-term monthly basis. This fact will disappont the bitcoin bulls because after the recovery rally on the weekly basis, she will rollover again, and then take out the lows and likely go for those lower price targets where price congestion occurred in prior years.
Trading is all about playing multi-dimensional chess only time is the dimension not space. The daily chart is set up in a happy possie d position wanting to see bitcoin rally. The weekly chart likely needs a week or two more to set up with possie d. The RSI is already showing a bit of a flatness so with next week's low price prints, the RSI should be possie d and ready to rock price higher. That would only leave the MACD line. But it may also set up with possie d next week, simply watch it, as stated, no reason to guess.
Thus, even if you say a lot of therefore's instead of thus's, you still will not be invited to the cool parties, only the nerd parties. Last Friday night we all danced to Una Paloma Blanca. That party was a milk and cookie nerdfest. Therefore, give bitcoin a few more days, it will likely set up with positive divergence next week or directly the week after and you can pull the trigger long.
However, do not marry the trade. It will run for a few weeks higher, the middle band, the 20 MA, is at 97K and dropping, that is an upside target, but bitcoin will then roll over and die again because of the weak and bleak monthly chart. The charts will tell you the story. The lower band needs tagged at 70K and that is strong price support from 2024 so that may be her bottom on the chart above.
As a guess, again, watch the charts so you do not have to guess, bitcoin will bottom next week, then up for 5 to 8 weeks perhaps to 90K+, but then roll over and die trailing lower for the remainder of the year.
If the stock market collapses in the near term, and this is on the table, then bitcoin may collapse to those 41K-55K targets faster. Keystone is not in bitcoin and not playing any derivatives in the cyber arena right now long or short. Obviously, with the chart above, Keystone will take a look next week and maybe buy bitcoin derivatives on the long side. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 2/4/26 at 5:04 AM EST: Bitcoin sits at 76K on the dot. Investor and analyst Michael Burry lays a brown egg in the bitcoin Cheerios this morning. Burry says bitcoin is exposed as a 'purely speculative asset'. Ouch. "Dem's are fightin' words. Burry provides a back-handed slap to bitcoin's face so the cryptocurrency sits at 76K deciding the direction forward. The 100-wk MA at 87K is overhead resistance. Ditto the 83K-ish neckline of the H&S that should receive a back kiss going forward. On the down side, the 70K level is important support. Burry's words do not change the technical analysis above.
Note Added 2/5/26: On 2/5/26, bitcoin falls to 60,075 wiping out all of King Donnie's crypto gains since the November 2024 election.
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