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Bitcoin (BTC) bulls should seek cover, at least when it comes to chart techniques.
The flagship cryptocurrency continued its price declines during the new weekly session, reaching $ 32,105 ahead of the London opening bell after falling around 10% during the day. In doing so, he raised the possibility of retesting his quarter low to $ 30,000 for a bearish breakout or a bullish pullback.
Bitcoin consolidates between $ 30,000 and $ 42,000. Source: TradingView
But as traders grapple with the ongoing mid-term bias conflict in the Bitcoin market, a classic technical pattern has surfaced to stimulate a bearish outlook.
The cup has turned
Spotted by Keith Wareing, an independent market analyst, the so-called Inverse Cup and Handle structure indicates a prolonged downward price correction to come 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 see the Inverse Cup and Handle pattern as their signal to open short positions to target deeper levels. The most extreme bearish target, in such a case, is determined by measuring the distance from the top of the cups to the breakout level of the patterns.
During this time, traders usually spot breakout levels as the price moves from the downward grip pattern while being accompanied by higher volumes.
The formation of Bitcoin Inverse Cup and Handle portends a coming bearish breakout. Source: Keith Wareing, TradingView
Based on the chart provided by Wareing, recent Bitcoin price action going from its pump to nearly $ 65,000, followed by a dump to $ 30,000 and a retracement to $ 40,000 ticks almost every boxes that confirm the presence of an Inverse Cup and Handle structure.
Except that the price of Bitcoin is still waiting for a bearish breakout.
Back in the game pic.twitter.com/aqLVazTK8J
Keith Wareing (@officiallykeith) June 21, 2021
Bitcoin’s depressive setup emerged as traders assessed the US Federal Reserve’s belligerent reversal on interest rates and inflation. Last week, the U.S. central bank signaled that it may raise benchmark lending rates by the end of 2023 instead of 2024 to contain rising inflation.
James Bullard, one of the Fed officials, said separately on Friday that the central bank could raise rates by 2022.
Fed Chairman Jerome Powell also told a press conference on Wednesday that his office will discuss reducing the $ 120 billion in monthly asset purchases he started in March 2020.
Bitcoin and other pandemic winners, including the Gold and Wall Street stock indexes, have fallen in tandem due to hawkish tones from the Fed. Meanwhile, the US dollar index, which measures the strength of the greenback against a pool of major foreign currencies, hit its two-month high, suggesting a renewed appetite for liquidity among investors.
New bearish prospects emerge
The latest Bitcoin price drop was also inspired by reports that China is stepping up the crackdown on crypto mining farms in the region. The state-backed Global Times newspaper reported that authorities in Sichuan have ordered the miners to cease their activities.
Sichuan is home to the second largest crypto mining community in China. The latest ban means that 90% of China’s mining capacity, which accounts for 75% of the world’s IT supply, is likely offline, Global Times noted.
The bitcoin hash rate fell to its lowest level in November 2020 following the history of the crackdown in China.
Bitcoin’s hash rate drops to 140.3 EH / s for the first time in six months. Source: Blockchain.info
Jeffrey Ross, founder and CEO of Vailshire Capital Management, said he expects Bitcoin to remain low for one to three weeks, fearing Chinese miners will liquidate at the end of it.
Nonetheless, he added that the macroeconomic outlook for cryptocurrencies remains bullish as long as they keep key technical targets above the 12 and 48-month moving averages.
Breaking Bitcoin below the 12-month moving average risks erasing its market valuation by more than 50%. Source: Jeffrey Ross, TradingView
The 48-month moving average for Bitcoin is currently around the $ 13,000 level.
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