bitcoin (B T c) has seen a rally of more than 25% since the May 19 crash to a low of $30,000. But the cryptocurrency continues to move under the prospect of facing another period of strong selloff due to the classic technical indicator pattern.
Bitcoin price in a ‘bearish flag’
dubbed as bearish pennant, the pattern is formed when an asset consolidates after a strong downward move and forms a small symmetrical triangle-like price range. It breaks below the range support and continues to move down. Traders typically estimate the size of a negative breakout move by measuring the height of the earlier move.
Bitcoin is currently trading inside a similar bearish emerald structure, turning sideways as it forms a sequence of lower highs and higher lows. Meanwhile, its consolidation structure is predetermined by a massive drop to around $20,000. Therefore, if the BTC/USD rate breaks below the pennant structure with increasing trading volume, there are high chances of it crashing to around $20,000.
The bearish outlook also takes cues from Bitcoin’s recent surge. It is worth noting that the cost of buying one bitcoin Falling from about $65,000 to $30,000 . done on May 19—or more than 50%—after that a quite a 30% jump.
In the meantime, market analytics service Income Machine is offering a warning “dead cat bounceThe emerging scenario in the bitcoin market, given that an upcoming rally in BTC/USD could face range from further selling pressure near the May 26 high ($39,000-$41,000 zone). Pass recommended to exit your bullish position.
What’s more, income machine too famous Failure to hold $30,000 as support would risk a crash for bitcoin price to $16,200 – a level coinciding with the bearish pennant target. The analytics firm chose $16,200 because of its historical relevance as a support during the November-December 2020 session.
“Conversely, the May 26 high would cause us to reverse our analysis and take a more bullish outlook for BTC-USD,” said Income Machine analysts.
Pankaj Balani, chief executive and co-founder of crypto derivatives exchange Delta, also expects an extended bearish breakout when bitcoin price closes below $34,000. Still, UBS alumni narrowed their downside target to $28,000, a 2021 low. He told Cointelegraph:
“Traders will be keenly watching these levels before taking any decisive action. The risk for the bulls remains higher than that for the bears, as the long-term price action is in a downward direction,” he said.
Balani also noted that the current price action shows demand in the $30,000-$35,000 range. Therefore, an upward swing from the said area could break the bearish flag – what Balani refers to as the symmetrical triangle – to the upside.
“BTC is forming a classic symmetrical triangle and any breakout/breakdown will result in a significant price movement,” he added.
“If BTC decisively breaks above $40K, a move up to $45K can be expected.”