Rally Ahead? Bitcoin’s Price May Be Charting a Previous Bull Pattern

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History often has a method of repeating itself.
The current price pattern at the bitcoin marketplace is eerily comparable to the one observed from the run-up to some significant rally that happened on Apr 12.
To start with, bitcoin charted a long-tailed candle on Aug. 14, akin to the one seen on Apr. 1, signaling the sell-off from the July 24 high in $8,507 has probably run its course.
Further, the leading cryptocurrency has spent the last seven days trading in a sideways manner around $6,400. Back in Apr, the cryptocurrency traded around $6,800 from the first 11 days before rising sharply over $8,000 on Apr 12.
More important, during the bitcoin price consolidation of early Apr, the BTC/USD shorts on Bitfinex jumped over 44% to publish a record of 40,719 and dropped sharply on Apr 12, meaning the big spike in BTC was probably fueled by the unwinding of short positions.
Interestingly, the short positions on Bitfinex now stand at $38,640 — the maximum level Apr 12 — and are just short of the record of 40,719, as seen from the chart below.
BTC/USD Shorts on Bitfinex

Daily graph

As seen from the daily chart above, BTC looks to be repeating the price action seen in ancient Apr. Even the relative strength index (RSI) is positioned precisely where it was ahead of Apr 12.
Therefore, the question now’s will bitcoin replicate the history by making a $1,000 rally within the next few days?
Theoretically, a sharp rise in a nutshell positions during price consolidation is considered a sign the industry is preparing for another round of sell-off.
Nevertheless, in BTC’s case, the consolidation is going on following a 30 percent fall, meaning the cryptocurrency is oversold. Add to the extreme bearish positioning, as indicated by the near record high BTC/USD shorts, and there’s always a danger of a short covering rally.
Therefore, it appears safe to say history will probably repeat itself.

The BTC marketplace is looking akin to the one seen from the first 11 days of Apr. The cryptocurrency might consolidate for another day or 2 before rising sharply toward $7,000.
A close below $6,000 (Feb low) would weaken the chances of BTC repeating the history and could change risk in favor of a fall to June low of $5,755.

Disclosure: The author holds no cryptocurrency assets during the time of writing.
Bitcoin picture via Shutterstock; Charts by Trading View

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