Bitcoin (BTC) bulls should look for cover, at least as far as technical charts are concerned.
The flagship cryptocurrency continued its price declines in the new weekly session, reaching $32.105 before the London opening bell, after an intraday drop of around 10%. In so doing, he raised the prospect of retesting his $30.000 quarterly low for a bearish collapse or an bullish retracement.
But as traders grapple with the ongoing mid-term bias conflict in the Bitcoin market, a classic technical pattern has emerged to boost a bearish outlook.
In this article, we will discuss:
the cup turned
Identified by Keith Wareing, an independent market analyst, the structure called the “Inverse Cup and Handle” points to an extended bearish price correction ahead in the Bitcoin market. In detail, the pattern develops when an asset forms a large crescent shape as it rises higher and corrects lower, followed by a less extreme upward rebound.
Traders look to the Inverse Cup and Handle pattern as their cue to open short positions to reach deeper levels. The most extreme bearish target in this case is determined by measuring the distance between the top of the cup and the pattern's breakout level.
Meanwhile, traders typically detect breakout levels when the price moves out of the handling pattern to the downside, while being accompanied by higher volumes.
Based on the chart provided by Wareing, the recent Bitcoin price – ranging from its pump to nearly $65.000 followed by a dump to $30.000 and a pullback to $40.000 – almost checks all the boxes confirming the presence of an Inverse Cup and Handle structure.
Except, the Bitcoin price still waiting for a bearish breakout.
back in play pic.twitter.com/aqLVazTK8J
—Keith Wareing (@officiallykeith) June 21, 2021
Bitcoin's depressing setup appeared as traders weighed the Federal Reserve's hawkish reversal in interest rates and inflation. Last week, the US central bank signaled it could raise benchmark interest rates by the end of 2023 instead of 2024 to tame the rise in inflation.
James Bullard, one of the employees of the Fed, said separately on Friday that the central bank could raise rates as early as 2022.
Fed Chairman Jerome Powell also said at a news conference on Wednesday that his office would now discuss reducing the $120 billion in monthly asset purchases that had begun in March 2020.
Bitcoin and other pandemic winners, including gold and Wall Street stock indices, fell in parallel due to the Fed's aggressive tone. Meanwhile, the US dollar index, which measures the strength of the US dollar against a pool of major foreign currencies, rose to a two-month high, suggesting a renewed appetite for money among investors.
More bearish prospects emerge
The last drop in Bitcoin price it was also inspired by reports about China's deepening crackdown on crypto mining farms in the region. The state-owned Global Times newspaper reported that authorities in Sichuan had ordered miners to shut down their operations.
Sichuan is home to China's second largest crypto mining community. The latest ban means that 90% of China's mining capacity, which represents 75% of global computing supply, has likely gone offline, the Global Times noted.
Bitcoin's hash rate dropped to its November 2020 low after China's crackdown history.
Dr. Jeff Rose, founder and CEO of Vailshire Capital Management, said he expects Bitcoin to remain weak in the next 1 to 3 weeks, fearing liquidation at the end of Chinese miners.
However, he added that the cryptocurrency's macro outlook remains optimistic as long as it maintains key technical targets above the 12- and 48-month moving averages.
Bitcoin's 48-month moving average is currently around the $13.000 level.