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Bitcoin is displaying a typical bearish technical pattern, which may cause BTC prices to fall below $20,000.
Bitcoin (BTC) bulls should seek for a cover, at least in terms of chart technicals.
The flagship cryptocurrency’s price continued to fall into the new weekly session, reaching $32,105 ahead of the London starting bell after a 10% intraday decrease. As a result, it increased the likelihood of a retest of its quarter-to-date low of $30,000 for either a bearish collapse or a positive retreat.
But as traders grapple with the ongoing medium-term bias conflict in the Bitcoin market, one classic technical pattern has surfaced to boost a bearish outlook.
The cup has turned
The so-called “Inverse Cup and Handle” structure, discovered by Keith Wareing, an independent market analyst, indicates that the Bitcoin market would see a protracted downward price correction. The pattern emerges when an asset produces a huge crescent shape as it rallies higher and corrects lower, followed by a less dramatic, upward rebound.
Traders use the Inverse Cup and Handle pattern as a signal to start short trades in order to target deeper levels. In such a situation, the most severe bearish objective is calculated by calculating the distance between the cup’s top and the pattern’s breakout level.
Meanwhile, traders typically spot breakout levels when the price breaks out from the handle pattern to the downside while accompanied by higher volumes.
According to Wareing’s chart, Bitcoin’s recent price movement — ranging from a pump to almost $65,000, a drop to $30,000, and a retracement to $40,000 — virtually meets all the criteria that prove the presence of an Inverse Cup and Handle structure.
Except that the Bitcoin price is still waiting for a negative breakthrough.
Monster inverse cup & handle invalidated on #bitcoin
Glad to to rule this fucker out. I guess Elon + Taproot + Saylor going full BTFD Ape news is working it’s magic pic.twitter.com/TikGHnua6Z
— Keith Wareing (@officiallykeith) June 14, 2021
The pessimistic Bitcoin setting emerged when traders analysed the Federal Reserve of the United States’ hawkish turnaround on interest rates and inflation. To combat increasing inflation, the Federal Reserve of the United States suggested this week that it may boost benchmark lending rates by the end of 2023 rather than 2024.
Separately, one of the Fed’s members, James Bullard, stated on Friday that the central bank may hike interest rates as early as 2022.
In a news conference on Wednesday, Fed Chair Jerome Powell also stated that his office will proceed to consider lowering the $120 billion in monthly asset purchases that the Fed began in March 2020.
Bitcoin and other pandemic winners, including gold and Wall Street stock indexes, fell in tandem owing to the Fed’s hawkish tones. Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a pool of top foreign currencies, rose to its two-month high, suggesting a renewed appetite for cash among investors.
More bearish outlooks emerge
The latest Bitcoin price plunge also took cues from reports of China’s deepening crackdown on crypto mining farms in the region. The state-backed newspaper Global Times reported that authorities in Sichuan ordered miners to wind down their operations.
Sichuan is home to the second-largest crypto mining cluster in China. According to Worldwide Times, the current restriction implies that 90 percent of China’s mining capacity, which accounts for 75 percent of global computing supply, has likely gone offline.
Following the China crackdown article, Bitcoin’s hash rate fell to its November 2020 low.
Jeffrey Ross, founder and CEO of Vailshire Capital Management, said that he expects Bitcoin to stay weak for the next one to three weeks, fearing liquidation at the end of Chinese miners.
Nonetheless, he noted that the cryptocurrency’s macro outlook remains optimistic as long as major technical objectives are held above the 12- and 48-month moving averages.
Bitcoin’s 48-month moving average is currently around the $13,000 level.