Bitcoin (BTC) bulls should look for cover, at least as far as charting technology goes.
The flagship cryptocurrency continued its price decline in the new weekly session, hitting $ 32,105 before the London opening bell after falling about 10% in one day. In doing so, it increased the prospect of retesting its previous quarterly low of $ 30,000 for either a bearish collapse or a bullish pullback.
But as traders grapple with the ongoing medium-term bias conflict in the Bitcoin market, a classic technical pattern has emerged that encourages a bearish outlook.
The cup has turned
The so-called “Inverse Cup and Handle” structure discovered by Keith Wareing, an independent market analyst, indicates an impending, lengthy downward price correction on the Bitcoin market. In detail, the pattern develops when an asset forms a large sickle shape as it rises higher and corrects down, followed by a less extreme uptrend.
Traders look to the inverse cup and handle pattern as their cue for opening short positions to reach lower levels. The most extreme bearish target in such a case is determined by measuring the distance between the top of the cup and the breakout level of the pattern.
Meanwhile, traders typically spot breakout levels when price breaks down from the handle pattern while accompanied by higher volumes.
Based on the chart provided by Wareing, Bitcoin’s recent price action – from its pumping to nearly $ 65,000, followed by a dump to $ 30,000 and a retracement to $ 40,000 – checks almost all of the boxes indicating the presence of an inverse cup and handle structure to confirm.
Except that Bitcoin price is still waiting for a bearish breakout.
Back in the game pic.twitter.com/aqLVazTK8J
– Keith Wareing (@officallykeith) June 21, 2021
The depressed bitcoin setup appeared as traders valued the Fed’s restrictive reversal on interest rates and inflation. Last week, the US Federal Reserve signaled that it could raise key interest rates by the end of 2023 instead of 2024 to curb rising inflation.
James Bullard, one of the Fed officials, said separately on Friday that the central bank could raise rates as early as 2022.
Fed chairman Jerome Powell said in a press conference Wednesday that his office would discuss reducing the $ 120 billion monthly asset purchases that began in March 2020.
Bitcoin and other pandemic winners, including gold and Wall Street stock indices, fell at the same time on the Fed’s hawkish tone. Meanwhile, the US dollar index, which measures the strength of the greenback against a pool of top foreign currencies, rose to its two-month high, suggesting a renewed appetite for cash among investors.
More bearish prospects emerge
The recent drop in the price of Bitcoin was also due to reports of China’s tightened crackdown on crypto mining farms in the region. The state-backed Global Times newspaper reported that Sichuan authorities had ordered miners to cease operations.
Sichuan is home to China’s second largest crypto mining community. The latest ban means that likely 90% of China’s mining capacity, which accounts for 75% of global computing, has gone offline, the Global Times noted.
Bitcoin’s hash rate fell to its November 2020 low following the Chinese raid story.
Jeffrey Ross, founder and CEO of Vailshire Capital Management, said he expects Bitcoin to remain weak for the next one to three weeks as he fears it will wind up at the end of Chinese miners.
Still, he added that the cryptocurrency’s macro outlook will remain bullish as long as it holds key technical targets above the 12- and 48-month moving averages.
Bitcoin’s 48-month moving average is currently around $ 13,000.