Bitcoin Broadening Wedge Formation Indicates Crash Below $30,000
Spot BTC/USD was down 11.61 percent to $33,739 .39 per token by 0639 UTC, after having reached its record high of $41,986 on January 8. Meanwhile, Bitcoin Futures listed on the Chicago Mercantile Exchange fell by 12.97 percent to $34,360 per contract, pointing to massive long liquidations over the previous 24 hours.
The volatile plunge left Bitcoin analysts guessing for the next price direction. Scott Minerd, who projected BTC/USD at $400,000 in the future, said the pair’s ongoing uptrend looks unsustainable in the short-term, pointing to its overextended-ness that could crash its price lower.
“The target technical upside of $35,000 has been exceeded,” the Guggenheim Partners’ managing partner added. “Time to take some money off the table.”
Meanwhile, prominent Bitcoin bull Vijay Boyapati came in defense of the cryptocurrency’s latest price correction, reminding that each of its volatile bull runs has historically shown downside moves of 30-40 percent. The analyst noted that Bitcoin’s upside mood would resume as soon as it finds a sessional support level.
In the 2017 #Bitcoin bull market, corrections found demand after drops from 30-40%
In the current bull market demand seems to appear after corrections between 15-20%.
This is probably indicative of a difference in buyers: retail (2017) vs institutional (today). pic.twitter.com/OfRX28lEco
— Vijay Boyapati (@real_vijay) January 10, 2021
As Bitcoinist previously reported, Mr. Boyapati’s prediction may come true as Bitcoin heads into a week that would witness a new stimulus package unveiled. US President-elect Joe Biden told reporters on Friday that one of his priorities after taking the oath would be to spend trillions of dollars to boost the US economy.
Fiscal deficits favor Bitcoin’s investment thesis. The cryptocurrency surged by more than 900 percent as the US Congress approved two stimulus bills of the combined worth of $3.2 trillion. That reduced the US dollar’s appeal and sent investors looking for safety in riskier assets, benefiting the top cryptocurrency.
Bitcoin Technicals: Bearish
Entering the realm of technical indicators, Bitcoin is showing symptoms of short-term bearishness.
That is primarily due to two factors: an overextended Relative Strength Index on a weekly timeframe and an Ascending Broadening Wedge. Bitcoin’s latest downside move has neutralized the RSI to an extent, but it remains inside an overbought area. That amounts to an extended correction lower.
Meanwhile, the Ascending Broadening Wedge shows bearish reversal signs as the price tests its lower trendline support for a potential negative breakout (as shown in the chart below).
Bitcoin Ascending Broadening Wedge pattern and its downside targets. Source: BTCUSD on TradingView.com
As the price confirms at least three retests of the upper and lower trendline—both of whom are diverging from each other—it shows sellers’ ambition to take control. On the other hand, the buyers manage to make the price rebound on the support line but lose control after the asset forms a fresh high. So it appears, Bitcoin has just done something similar.
The cryptocurrency now has an 80 percent possibility of breaking below the Wedge, based on the pattern’s overall performance across traditional markets. Should the move happens, the BTC/USD exchange rate would target Wedge’s lowest point as its downside target, which is at $24,655.
Nevertheless, the pair could attempt a pullback from the lower trendline itself, surging towards the upper trendline, followed by a breakout. On a breakdown move, it could bounce-back from $26,375 or $29,891 as well (watch out for volume spikes near these levels for confirmation).