Mapping the Market: Bitcoin has challenges to face after dramatic surge

Sept 3 (Reuters) - Bitcoin is catching its breath after a dramatic 30% rise in recent weeks, and while technical analysis suggests it could further extend those gains, chart patterns show bulls have their work cut out.

The sudden surge, fueled by the U.S. Treasury's move to double buyback sizes for long-duration debt, broke a string of lower peaks on bitcoin's price chart that had been building since May this year. Lower peaks show diminishing momentum and demonstrate that bears are gaining control.

Bitcoin vaulted above the 21-, 55-, 100- and 200-day moving averages, which allow technical analysts to develop clearer views of a trend by stripping out price extremes. The 21-day average also created "golden cross" formations by rising above the longer-term averages, while the upsurge almost entirely erased the May-July fall.

As long as bitcoin holds above the halfway point of the August rally – near $71,781, according to LSEG data – bulls are likely to remain in control. Yet caution is warranted: some of the recent hesitance came after Fed Chair Kevin Warsh led markets to expect tighter policy from the U.S. Federal Reserve, which usually boosts the dollar and weighs on bitcoin.

Bitcoin's pause before challenging the May high at $82,793 is significant. That level is just below the "golden retracement" level -- or the 61.8% Fibonacci retracement -- of this year's fall. Adding to that level's significance, the 55- and 100-week moving averages are nearby. A rise above that area would increase expectations of an advance on the $90,000 area and then this year's peak of $97,867.

On the downside, a close below $75,674, the August 23 low, and $71,781 would increase expectations of a fall toward the August 17 low around $62,677 and then a return to the 2026 low of $57,776.

What the chart shows:

• Break of downtrend of lower peaks that had persisted since May
• Golden cross formations and reclaiming of key moving averages boost bullish case