If you’re following cryptocurrency price trends these days, then you’re probably wondering what is Bitcoin breakout and how you can also capitalize on it. After all, it’s got everyone in quite a flurry, hasn’t it?
Well, look no further! In this article, we will tell you what is breakout in trading, what is Bitcoin breakout, what crypto experts are saying, and what your next steps should be if you want to trade breakout stocks and crypto on exchanges like Binance, KuCoin, ByBit, MEXC, eToro, Huobi, and BingX.
What does breakout mean in trading?
In trading jargon, a breakout is a shift in the price of an asset – stocks, cryptocurrency, etc. – when it either rises above a resistance line or falls below a support line. This means that there is a change in trend in the movement of the asset’s value or price.
Here is a graph showing what resistance and support lines are:
As you can see from the graph, when the price of an asset is below a resistance line (which acts as a ceiling), a breakout occurs when the price rises above the resistance line. And when the price of an asset is above a support line (which acts as a floor), a breakout occurs when the price falls below the support line.
In technical analysis, experts make predictions and draw resistance and support lines based on historical data. Essentially, as soon as a breakout occurs, a resistance line becomes a support line – the reverse concept.
This pattern break is influenced by many micro- and macro-economic factors such as local elections, inflation, interest rates, and the global economy.
What you need to understand is that a breakout occurs when there is significant buying or selling pressure. This means that there is a greater than normal volume of buying (if the breakout occurs over a resistance line) or a greater than normal volume of selling (if the breakout occurs over a support line).
This is when it’s usually a good time to enter a trade.
Resistance and support lines are subjective, though. Different traders will interpret these lines differently and not all will act on the same resistance or support levels.
However, if a large number of traders consider a certain breakout level to be significant, and there is a significant volume of trading that occurs, then the price of the asset will likely continue to trend in the direction of the breakout. This will set a new price floor or ceiling for the asset.
Breakouts happen in various graph patterns, including triangles, flags, head and shoulder patterns, and wedges. They can also occur as range or channel breakouts. And before a breakout occurs, there is usually less volatility in asset prices. It’s also worth noting that the longer a pattern has developed, the more explosive the breakout will be.
But a word to the wise: sometimes, a breakout may actually be a fakeout (fake breakout) when the price of an asset breaks out of the range but returns back within it immediately. That’s why many experienced traders like to wait for larger time frames before making the decision to enter into a trade and they look at trading volume as the main indicator of breakouts, not price.
Is breakout trading good?
So what is the point of breakout trading?
Let’s look at an example to illustrate. Suppose you are a trader who wants to profit from buying and selling a hypothetical cryptocurrency coin called Bytec. But you have a stop-losses parameter in place so that your AI trade tool doesn’t burn through your entire finances.
Bytec’s price suddenly falls below $5 (your stop-losses parameter setting) due to macroeconomic actors and your trade tool stops trading this cryptocurrency because, to you, it’s not worth selling below this price.
And you’re not alone. Many other traders feel the same way about this particular crypto coin, and suddenly, there’s a large drop in volume of traders selling this cryptocurrency – a domino effect.
With a significant drop in selling volume, the overall supply/availability in the market for this coin decreases – and its price rises. This causes a breakout to occur over a resistance line.
And this is when breakout trading opportunists step in! These traders will sell their Bytec coins at a much higher price to those looking to buy immediately. And they will make a profit from this opportunity because they took advantage of a breakout situation.
Note: A 52-week high or low is different than a breakout. A 52-week high or low is simply the highest or lowest price seen over the past year. A breakout is a rise above the resistance line or a fall below the support line.
What does Bitcoin breakout mean?
Now that you know what breakout means in trading, let’s look at what is Bitcoin breakout.
A Bitcoin breakout is pretty similar to a regular trading breakout. In cryptocurrency, a breakout occurs when the price of a particular crypto coin breaks above a specific resistance level or drops below a specific support level.
These crypto breakouts are either bullish (go above the resistance line) or bearish (fall below the support line). Bullish breakouts signal that there is significant buying pressure while bearish breakouts signal significant selling pressure.
Traders identify and gain insight about these price trends by using indicators such as the Relative Strength Index (RSI), Moving Averages, and Bollinger Bands, or by observing crypto trading columns and historical data.
Is a Bitcoin breakout imminent?
Bitcoin (BTC) has officially crossed the $70,000 mark and interest in this cryptocurrency is at an all-time high. Could it possibly breach the $100,000 mark soon? Is a breakout imminent?
Crypto breakout alerts are in a frenzy and traders and stakeholders are watching with bated breath to see where the future value of this coin, with a current market cap of $1.33T, is headed. And based on the current trend, it seems that Bitcoin will take up more market cap very soon.
Popular crypto analyst, Rekt Capital, wrote in a post on July 27, 2024, to his almost half a million followers:
“The clustering continues between $65,000 and ~$71,500. As a result, there is scope for Bitcoin revisiting the Range High at ~$71500 at some point in the future.”
As of 24 July, 2024, 75% of Bitcoin holders were in profit as the value of the coin reached an all-time high. But will the predictions for 2024 for BTC hold true and will it finally cross the $100,000 mark?
Analysts are of different opinions.
Some say that Bitcoin’s historical trends have always been flat for August and September and it’s unlikely that the coin will be able to breach the predicted mark that many are so desperately waiting for. However, others are of the opinion that any downward trend will be cushioned by the US unemployment rate, interest rate policy, inflation rate, cooling labor market, and upcoming election calendar. In addition, while Bitcoin’s been in a steady downward trend since March, it has by now breached the upper trendline more frequently than the lower trendline – a sign that a breakout is more probable than a breakdown.
Today, Bitcoin’s dominance is at 55.5%, the highest it has been since April, 2021.
The Bottom Line
Based on the mixed predictions and analysis above, Binance experts say that while Bitcoin shows the potential for a breakout, traders should stay cautious and keep an eye on the broader macroeconomic factors and market trends.
The coming weeks are crucial for BTC stakeholders and only time will tell what is Bitcoin breakout going to look like – if anything at all.
For more news on breakout crypto coins today and in the future, follow CryptoPie!
FAQs
What does Bitcoin halving do?
Every four years, the number of Bitcoins created through mining gets cut in half. This means that the reward for contributors in the network gets halved too. In May 2020, there were 6.25 Bitcoins introduced into circulation every ten minutes. On 24 April, 2024, that number dropped to 3.125.
This halving will continue every four years until all 21 million Bitcoins have been mined (estimated to happen by the year 2140). This process was coded into Bitcoin protocol to limit the total supply of the coins and increase scarcity.
Is breakout trading profitable?
As with any asset, traders need to keep a close eye on market conditions and historical data to determine the best course of action at any given point in time. Entering into a trade in the early stages of the breakout trend is most profitable since it will help you secure greater profit as asset prices move quickly once they cross the breakout threshold.
The article above on what is Bitcoin breakout can also help you decide what action you want to take on the Bitcoin breakout frenzy!
