Is Bitcoin About To Breakout? 3 Key Indicators Say Yes (Technical Analysis) (Rating Upgrade)

Summary Bitcoin is in a strong uptrend, consistently making higher highs and higher lows, signaling a bullish market structure near all-time highs. Our custom Mean Deviation Detector shows Bitcoin has room to move higher before reaching extreme levels, supporting a bullish outlook. Bollinger Bands indicate expanding volatility, suggesting a breakout above $110,000 is likely, with a price target of $150,000. Despite some RSI caution, the risk/reward is attractive; we’re upgrading BTC-USD to ‘Buy’ with a recommended stop loss around $75,000. Here at PropNotes , we’ve been crypto enthusiasts since 2016 when we purchased our first few Bitcoins ( BTC-USD ). Curiously, though, we didn’t start actually covering or writing about the leading digital asset until October of last year, when we rated BTC a ‘ Strong Buy ‘. In an article titled: ” MicroStrategy Is Tapped Out, Short Shares And Buy Bitcoin Instead “, we made the case that buying physical Bitcoins directly would be a better option than buying into Strategy ( MSTR ), the infamous, leveraged, Bitcoin holding company. Since that call, Bitcoin is up roughly 50%, although in recent months, we ended up getting more conservative in the space due to the incredibly strong rally we’d seen in prices coming into 2025: Seeking Alpha Fast-forward to the present, however, and BTC has – once again, begun trading near all-time highs. It seems a good thing is hard to keep down. But is Bitcoin actually about to stage a major breakout? We think so. Today , we’ll break down the technical situation with Bitcoin, give our outlook, and explain why 3 of our favorite indicators are currently pointing to higher prices for BTC. Sound good? Let’s dive in. Market Structure The first – and perhaps strongest – piece of evidence that Bitcoin could be headed north can be seen when you take a look at how BTC has been trading over the last few years. When it comes to assessing any asset’s technical position, we tend to look at market structure before all else. Market structure – for those who don’t know – is simply a way of describing the recent highs and lows that an asset has experienced over a given period of time. These levels, then, give clues as to where future price action could occur. In this case, if you take a look at Bitcoin on the weekly chart, you’ll find that the asset has been making a series of higher highs and higher lows, from roughly the start of 2023. This defines a clear up-trend in the price of Bitcoin: TradingView In the chart above, the green and red lines delineate recent highs and lows, respectively. This higher high, higher low price action – broadly – is the foundation upon which we can then layer on further observations. As a quick side note, Technical Analysis like this doesn’t work that well on most stocks, due to the fact that equities are driven primarily by economic value (earnings) as opposed to sentiment. However, assets with more vague economic value can be prone to trading in more traditional ‘price patterns’. Looking more specifically at Bitcoin, we can see that in March 2022, the digital asset made local highs of roughly $48,000 which you can see denoted by the green horizontal ray below: TradingView From there, the asset traded lower, before slowly picking up steam into 2023 and 2024. Following a breakout in October 2023, the price went from $31,000 per coin to roughly $73,000 per coin. In the following period of consolidation, the lowest point (in August 2024) was roughly $49,000: almost exactly where bitcoin had made a local high two years prior : TradingView We can see the price pattern repeat again more recently with the rally in November, ultimately ending up at highs near $109,000. From there, the asset drew down to roughly $74,000, which is exactly where it peaked roughly a year earlier: TradingView As we can see, Bitcoin respects these important price levels in the market and uses them as guideposts for further price action. Now, Bitcoin has rallied back from $74,000 to $108,000, which is quite close to the asset’s all-time highs. If history is any guide, then we’re expecting a consolidation leading into a breakout, or a direct breakout above 110k in the coming weeks and months. This is supported by a combination of the importance of these price levels, with the fact that we are in a categorical up-trend. Mean Deviation That said, of course, price action isn’t everything , and some indicators can provide additional clues as to what might happen going forward. Next, we’ll take a look at a custom indicator we created, which we call the ‘ Mean Deviation Detector ‘ – or ‘MDD’ for short. This indicator plots the distance from Bitcoins current price, versus Bitcoin’s ‘ average pricing zone ‘. The idea here is that the further away Bitcoin gets from this average pricing zone, the more likely it is to revert back to that average pricing zone. This may sound a little bit confusing, but in essence, market extremes often don’t stay that way for long – on either side of the market. Right now, if Bitcoin’s recent rally from $74,000 to $108,000 presented an extreme market movement, we’d argue that it would be very difficult for Bitcoin to break out and make substantially new all-time highs. However, if you look at the chart, what you’ll find is that the MDD indicator remains relatively placid, only trading at roughly 21% above the coin’s average pricing zone: TradingView If you look at where the MDD has traded historically, you’ll find that anything above 36% or higher would be an extreme and anything 26% or lower would be an extreme: TradingView This is our read on BTC, over the last decade or so. However, as you’ll see, we’re still in this range, which means that there’s significant room for Bitcoin’s price to move north in our view. Taken together with the market structure we outlined earlier, we’d argue that Bitcoin is setting up for a potential move higher. Bollinger Bands Finally, Bollinger bands are an incredibly useful indicator for a number of reasons. While they can be used to read a market in a number of different ways, in this case, the indicator’s outer bands are what we’re most interested in. As you can see, with the indicators average settings, we’re getting an expanding cone of potential price action, which shows that more volatility could be on the way: TradingView This is as opposed to contracting bands, which would signal that whatever previous bout of volatility that happened was now over, and prices may be headed back towards consolidation. Right now, we don’t see this. Bollinger Bands are indicating that more volatility could be on the way. When you add up the situation with Bitcoin, what you’ll find is an asset that’s trading in a strong price trend near all-time highs. Not only that, but there’s considerable upside room if Bitcoin wants to move north before prices reach local ‘extremes’. Finally, Bollinger Bands indicate that we could see a cone of increased price volatility going forward, which signals that a breakout could be imminent. For us, if you ‘flip’ the recent price action, you’ll see that the recent dip had a range of roughly $45,000, between 110k and 75k. Going forward, our price target for potential breakout would be around $150,000, which is $40k above previous all-time highs. This is standard when it comes to traditional Fibonacci price target setting. Risks Of course, there are some risks to our thesis. Not all indicators are indicating a potential breakout, chief among them being the relative strength index – or ‘RSI’. The RSI is actually indicating that prices may form a ‘double top’, based on the fact that we’re seeing reduced strength and vigor on the RSI, while the price action has been equally strong in this recent run-up. As you can see on the chart below, the RSI is weak going into this all-time highs situation: TradingView This is a classic sign that prices might break out higher and then fail hard at a double top . Given how much respect and experience we have with this indicator, this is the strongest piece of evidence we have supporting the idea that whatever breakout does happen may end up being a ‘trap’ for investors. This is definitely something to consider, which is why any trade you put on for this breakout should be accompanied by a clearly defined stop loss. We’d argue that stop loss around $75k would give enough room for the trade to potentially work, while simultaneously controlling risk effectively. Summary Overall, despite the somewhat conflicting readings, we’d argue that, on balance, the technical information available is indicating that Bitcoin could be headed higher either after a period of consolidation or within the next few weeks. Trading this long with a potential stop loss around $75k per coin appears to be an attractive risk/reward opportunity in the market. As a result, we’re also upgrading BTC-USD to a ‘ Buy ‘. Stay safe out there!

Source: Seeking Alpha