Are Bitcoin Prices Heading For Further Short-Term Losses?

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Bitcoin prices fell to their lowest since late June today as they tested their low … [+] interval.

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Bitcoin prices, which have been trading widely between $ 30,000 and $ 42,000 for almost two months, have repeatedly tested the lower end of this range lately.

Earlier today, the world’s largest digital currency fell to as low as $ 30,426.88, according to data from CoinDesk.

At this point, it was trading at its lowest since June 26, according to additional figures from CoinDesk.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Bitcoins Descending Triangle

Chuck Jones, a senior contributor to Forbes, wrote about recent cryptocurrency price movements in an article published today, noting that bitcoin has recently formed a descending triangle.

The descending triangle is a bearish formation that typically forms during a downtrend as a continuation pattern, according to StockCharts.com.

These formations are bearish patterns that indicate the distribution or sale of an asset.

An Investopedia article provides further information, indicating that:

Descending triangles are a very popular graphical figure among traders because they clearly show that the demand for an asset, derivative or commodity is weakening.

When the price breaks below lower support, it is a clear indication that the bearish momentum is likely to continue or become even stronger, the article added.

Analysts intervene

Several experts have spoken about this situation, offering key technical analysis for investors to use.

There is definitely a descending triangle on the daily chart, said Jake Wujastyk, chief market analyst at TrendSpider.

This is generally seen as a bearish continuation pattern, but may tip higher in some cases.

Jason Lau, COO of the OKCoin cryptocurrency exchange, also spoke.

I would generally agree that bitcoin has entered a descending triangle, he said.

However, support levels in the order of $ 30,000 held up despite repeated testing.

While Lau spoke of the resilience of digital currency at nearly $ 30,000, some analysts pointed to the losses the digital currency could take if it breaks the support that exists around this key psychological level.

If the descending triangle begins to crumble through the previous lows, market participants should watch for a dip towards the VWAP anchored Covid crash below around $ 26,500, Wujastyk said.

He also highlighted the history of the digital asset market.

Based on Bitcoin’s seasonality over the past 5 years shown on TrendSpider, August has one of the lowest win rates of the year at 20%, Wujastyk said.

This means that since 2016, only the August 5 monthly close has been higher than the July close.

A combination of the bearish technical setup and the low August win rate would suggest a drop rather than a rise in the remainder of Q3.

Bitcoin appears precarious and is trading lower alongside global markets as concerns about the economic recovery increase, said Pankaj Balani, co-founder and CEO of Delta Exchange.

He noted that compared to May and June, digital currency is much more likely to drop below $ 30,000.

Balani pointed out that if bitcoin BTC convincingly breaks below $ 30,000, it could experience sharp downward moves.

Bullish factors

While analysts who contributed to this article frequently made bearish comments, they highlighted several developments that could turn bullish.

If the descending triangle erupts to the upside, market participants should watch for an upside to test the all-time high pegged VWAP around $ 42,000, Wujastyk said.

Jon Pearlstone, editor of the CryptoPatterns newsletter, also spoke about the upside potential of cryptocurrencies.

The bulls want bitcoin to break resistance at $ 35,000, which then puts a target of $ 42,500 on the line.

Beyond that, in the near term, concerns about the digital currency suffering further losses could be exaggerated, according to Katie Stockton, founder and managing partner of Fairlead Strategies, LLC.

I see where they see the triangle, she said of analysts reading recent bitcoin price movements as contained in a descending triangle.

I call it a consolidation phase, Stockton said.

In my opinion, this is ripe for a shakeout, she said, referring to a situation where weaker hands sell and stronger hands rush and buy.

In other words, the support that Bitcoin has near $ 30,000 may ultimately hold.

Disclosure: I own bitcoin, bitcoin cash, litecoin, ether, and EOS.

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