Bitcoin
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Bitcoin is showing signs of replicating its trend from 2019 that crashed its prices by more than 50 percent.
According to a fractal first spotted by TradingShot, an independent trade analytics firm, the flagship cryptocurrency’s downside correction move from its recently-established record high near $42,000 is very similar to its plunge in June 2019. That risks putting BTC/USD en route to deeper price levels in the monthly sessions ahead.
“Notice that both 2019 and today’s Parabolic Rises share a few common characteristics,” said TradingShot analysts in a note published Wednesday.
“Both rose by approximately +385% from the time they last made contact with their 1D MA50 until their respective peaks,” they added. “Both pulled-back from their peaks by approximately -30% on the low before contact was again made with the 1D MA50. At the time of the 1D MA50 test, the RSI was on the Support Zone.”
Bitcoin 2019 and 2021 price moves comparison. Source: BTCUSD on TradingView.com
Bitcoin tested the 50-day moving average as support on Wednesday as its price slipped below $30,000. The cryptocurrency retraced its way to the upside upon facing a comparatively higher buying pressure. Nevertheless, its bullish bias appeared limited owing to a stronger US dollar, reiterating TradingShot’s fears of a 2019 fractal-repeat.
The firm said BTC/USD would need to hold above 50-DMA if it wants to keep its bullish outlook steady. But if the pair breaks bearish on the support, then it risks falling to the next moving average in the queue—the 100-DMA. As of now, it is sitting near $23,000, down 45 percent from Bitcoin’s record high near $42,000.
Meanwhile, if BTC/USD stays above the 50-DMA, its likelihood of continuing its rally back towards $40,000 and beyond would increase.
Converging Bitcoin Indicators
The TradingShot’s 2019 fractal theory matches bias with other technical indicators that, too, point at a further bearish breakdown in the Bitcoin market.
For instance, BTC/USD is fluctuating inside what appears to be a Descending Triangle. Chartists perceive the pattern as a bearish reversal indicator at the end of an uptrend. Typically, the Descending Triangle’s downside target is as much as the maximum distance between its upper and lower trendlines.
Bitcoin Descending Triangle breakdown warns about a correction to levels below $20,000. Source: BTCUSD on TradingView.com
In Bitcoin’s case, that distance is nearly $13,000. That puts the cryptocurrency en route to its 200-day moving average that sits near $17,000.
The Bullish ‘What If’
Meanwhile, Jonny Moe, an independent market analyst, notes that the Descending Triangle could also shapeshift into a Falling Wedge pattern, which is bullish.
“I don’t think this is what we’re in for, but it’s at least worth acknowledging, the bull case here is that this isn’t a giant descending triangle, it’s some sort of falling wedge type pattern that would form a bottom basically right about where we are now,” he said.
Bitcoin Falling Wedge patterns points at a bullish breakout. Source: BTCUSD on TradingView.com
In either case, it appears Bitcoin would retest the 100-DMA as suggested by TradingShot.
Bitcoin prices reclaimed $30,000, a psychological support level, hours after slipping below it during the New York session Wednesday as investors assessed Jerome Powell’s decision to keep the Federal Reserve’s dovish policies steady.
The US central bank chief asserted that his office would hold the benchmark interest rates near zero while purchasing government and corporate bonds at a rate of $120 billion per month. He noted that their expansionary policies would stay firm until the US economy achieves maximum employment and inflation above 2 percent.
“The [coronavirus] pandemic still provides considerable downside risks to the economy,” Mr. Powell stressed.
Bitcoin recovers back above $30,000. Source: BTCUSD on TradingView.com
Bitcoin climbed to an intraday high of $31,880 after Mr. Powell’s comments, only to pare a small portion of those gains while entering the early Asian session Thursday. The benchmark cryptocurrency was trading near $31,500 at the time of this writing on low volumes, suggesting an underlying short-term bias conflict among traders in the market.
That is partially due to a stronger US dollar. The greenback closed Wednesday 0.53 percent higher at 90.64 against a basket of top foreign currencies. Meanwhile, US stocks notched their worst day of 2021, with the benchmark S&P 500 and the tech-savvy Nasdaq Composite each plummeting 2.6 percent. Gold fell 0.23 percent.
Bitcoin against Falling Yields
Investors instead clamored into government bonds. The rally in the benchmark US 10-year Treasury note sent its yield briefly below 1 percent on Wednesday. Later, it settled at 1.01 percent. Traders in the Bitcoin market perceives lower bond yields as their cue to increase their bids on the cryptocurrency.
US 10-year Treasury yield plunges as demand for bonds rises. Source; US10Y on TradingView.com
Josh Rager, an independent market analyst and head of BlockRoots.com, meanwhile focused on Bitcoin’s technical prospects as it remained choppy around $30,000. Recalling the cryptocurrency’s price movements from the past, he noted that BTC/USD has a habit of entering prolonged consolidation periods after its parabolic moves. And the current situation is no different.
“Back in 2016-2017, there were times when Bitcoin hit a local high, followed by a pullback where it took several weeks to a couple of months for the price to reclaim the high and move higher up,” Mr. Rager tweeted. “Be patient here — Bitcoin will hit another high, but it may take weeks to get there.”
Bubble Woes
But skeptics noted bubble-like features in the Bitcoin market as it swelled by more than 1,000 percent in just 10 months of trading.
Deutsche Bank surveyed 627 global market professionals earlier in January to rate the ongoing market bubbles on 0 to 10, with 10 pointing to “extreme bubble.” Bitcoin got a score of 8.7.
But even sovereign debt has become a bubble, believes Luke Gromen, the founder of research firm FFTT.
“I think at a very minimum, before this is all said and done, we’re likely to see negative 5-10% real interest rates in the U.S.,” he told Blockworks.
“I think at this point, Bitcoin has been on top in terms of performance, but I think it’s all being driven by the same dynamic, which is this bursting global sovereign debt bubble,” he added.
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