Bitcoin is forming an inverse head-and-shoulder pattern just with Fed rate cuts on their way
Every asset class will be impacted by the Federal Reserve embarking on a rate-cutting cycle. That includes cryptocurrency, and especially Bitcoin , still the largest and most widely followed by a long shot. Even for investors who don’t trade or care about it, Bitcoin matters. Why?It has become a critical risky assetbecause of its strong positive correlation with the S & P 500 over the last several years. While they don’t always move in lockstep, it is rare for the two to diverge for long. At times, bitcoin leads; other times, the S & P 500does. In 2025, BTC topped in January, while the S & P hovered near its highs for several weeks. Bitcoin’s decline proved to be a leading indicator, as the SPX followed lower. Both assets bottomed in April. More recently, BTC has slipped from its August peak, while the S & P briefly topped at the same time but has since moved higher. The best-case scenariois that the S & P, leading this time, pulls bitcoin higher—allowing it to eventually surpass its last high. For that to happen soon, Bitcoin must complete a potential inverse head and shoulders pattern, which has been forming over the last four weeks. This structure began with Bitcoin holding its late-August low, rallying, and then pausing—creating a possible right shoulder. The entire pattern has developed just under the $117,000 level. A traditional measured movefrom this setup targets around $127,600, which would put BTC above its early August high. If realized, this would likely coincide with the S & P 500advancing as well. If momentum carries further from that point, the even higher$142,000 breakout targetcould come back into focus. While BTC has not yet achieved that level and hasbacked and filledin recent weeks, it hasrespected the breakout zone — undercutting it twice butbouncing backeach time. A similar breakout occurred inNovember of last year, which sparked a strong advance. Now, as we move through thesecond half of September, investors know that bitcoin has historically shownseasonal strength in Q4. This backdrop could help the technical conditions mature and allow these two patterns toresolve to the upside. Another angle to consider is the downsloping trading channelthat has defined the last few months. Such channels are often bullish within a long-term uptrend, which bitcoin has been in since bottoming in late 2022. Along the way, bitcoin has broken out from five prior downward-sloping rangessimilar to this one—a positive technical sign. The challenge is that the last two breakoutsdid not generate strong follow-through in momentum. The 14-week RSItopped just below 70twice this year (yellow), compared with much stronger readings in late 2023 and early 2024, when RSI surged into the 80s twiceand the high 70s once (green). For momentum to truly return, a similar RSI surgewill need to appear on the weekly timeframe. If that occurs, amuch larger advancecould unfold. This zoomed outweekly chartshows that thetwo prior bullish breakouts hadextreme follow-through—Bitcoin advanced over130% in late 2023and another50% in 2024AFTER breaking out. As the saying goes, while history doesn’t always repeat, it oftenrhymes. Bitcoin has consistently played a major role in shapingglobal risk appetite, and its direction will becritical for equitiesin theU.S. and worldwide. — Frank Cappelleri Founder: CappThesis DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
