Crypto analyst Nicholas Merten recently shared the essential target level that Bitcoin (BTC) needs to reach in order to confirm the start of a bull market. Merten also issued a warning about a possible sharp drop. Here are the two scenarios presented by the analyst.
Summarizing the Requirements for Bitcoin's Rise
Merten stated that if Bitcoin fails to break above the range it has been trading in for the past six months, it will face a significant correction. The analyst explained the price trajectory that the leading cryptocurrency needs to follow in order to increase in value:
If a new bull market is truly beginning, #Bitcoin needs to accomplish certain important milestones. From this point forward, Bitcoin needs to surpass the range between $28,000 and $32,000. This is the price range that currently serves as resistance in the previous support zone of the last bull market. It has been moving in this manner since at least April.
If it reaches $31,000 again, as it did in April, June, and July, but fails to break the resistance at $32,500 and cannot reach new highs, then there is a high probability that it will drop again.
Strong Drop Warning under the Influence of Head and Shoulders Formation
According to Merten, the head and shoulders formation on Bitcoin's weekly chart indicates an impending strong drop. This formation is characterized by three peaks: two external peaks on the left and right (shoulders) and one peak in the middle (head). Merten used the following statements to describe his possible scenario:
If a reverse head and shoulders formation forms at the bottom levels, it means that the price will move upwards, indicating a rise. However, this is a typical head and shoulders formation. If BTC encounters resistance just below $32,000 and drops below the channel around $25,000, then this formation will come into play. That's when a clear short-selling opportunity arises.