This chart pattern is causing trouble for bulls
Bitcoin: This chart pattern is causing trouble for bulls – further decline expected
Bitcoin failed to shoot above $50,000 on Sunday, despite a growing bullish sentiment towards the said upside target. Instead, the benchmark cryptocurrency warned of a potential bearish reversal after forming a pattern that chart gurus call a „rising wedge“.
The BTC/USD exchange rate moved higher in recent days, leaving a trail of higher highs and higher lows. Its movement formed two Crypto Superstar upward trend lines converging to a single point called the „Apex“.
Technically, the structure formed a rising wedge formation, which typically leads to a price breakdown.
The downside target in a Rising Wedge corresponds to the maximum distance between the upper and lower trendlines of the structure. In Bitcoin’s case, the length is almost $5,500, which brings the wedge’s downside target near $43,000 in the coming sessions.
The bears are not in complete control despite the recent breakout attempts. It looks like a break below the lower trendline of the wedge will result in Bitcoin (Massive Bitcoin investment planned!) gaining additional support from another upward trendline, which is an ascending channel pattern.
The price bottom could set the stage for another leg higher – a rebound move that could see Bitcoin test its refreshed all-time high of $49,700, followed by a close above $50,000.
Further bullish tailwinds come from Bitcoin’s Relative Strength Indicator, which continues to show no overbought conditions, although it is trading near levels. As a result, the cryptocurrency could see a slight rebound towards $50,000, with $48,000-48,200 serving as an intermediate hurdle.
On-chain indicators support a short-term bullish outlook. Data retrieved from CryptoQuant shows that stablecoin reserves are at a record high across all exchanges – suggesting traders could use dollar-linked tokens to buy cryptocurrencies, including bitcoin.
„If you are a long-term investor, now is the time to buy BTC,“ writes Ki-Young Ju, CEO of CryptoQuant. „I’m not sure how many corrections would be on the way, but the on-chain indicator says there are enough stablecoins on exchanges compared to Bitcoins to get another leg up.“
Macro risks for bitcoin
As traders and investors buy bitcoin and build up their bitcoin positions, they are anticipating a wave of risks from the possible better-than-expected recovery of the US economy.
In its latest report, Bank of America writes that the US dollar could see growth in 2021 as the Federal Reserve hints at reducing its ultra-dovish stance by scaling back its $120 billion-a-month asset purchase programme.
Strategists believe policy normalisation could appear by early next year.
In the meantime, the European Central Bank is likely to step up its easing programmes, which in turn could weaken the euro. The dollar is likely to gain strength as a result.
Bitcoin could face a correction if global sentiment towards the greenback and the US economy improves.