Bitcoin (BTC) Relief Rally Could Rise Another 6%; But what next?

If history is any indicator, the rising wedge pattern could cause a drastic drop in Bitcoin price. Since the beginning of 2022, this particular pattern has appeared twice, and the result of the previous two caused 30-40%. Therefore, if the market action follows this pattern theory, the BTC price could plunge below $19000 and dive to a new lower low.

Highlights BTC Analysis:

• The Fibonacci indicator reflects that the BTC price has fallen below the 50% retracement level
• The 20-day dynamic support turned into possible resistance
• The intraday trading volume in Bitcoin is $25.3 billion, indicating a loss of 27.3%.

Source-Trading view

On August 16, BTC price produced a bearish breakout from the ascending wedge pattern that signaled the end of the short-term recovery. The resulting decline was in line with the news that the US Fed may raise interest rates in September by 0.75, triggering a significant retracement.

The drop after the retest accounted for a 12% loss that dragged the BTC price to $20785 with local support. However, after such a steep fall, the price has recovered slightly in the last two days, registering a 3% increase.

However, despite rising prices, volume activity is slowing, indicating weakness in bullish commitment. Thus, with sustained buying, BTC price is likely to test the inverted resistance at $22600, which could replenish the bearish momentum.

The expected reversal from $22600 will encourage sellers to break down from $20785. Also, the wedge pattern break technical setup has set the ongoing decline to break the bottom support from June-July at $19000 and now $16000.

Although things look better for sellers, if buyers fought trend control from sellers with resistance at $22600, a possible breakout could allow bulls to resume the recovery rally above $25000.

Technical indicator

Bollinger Bands Indicator: BTC price pierced the lower band of the indicator during the recent drop, indicating that the selling pressure was too sudden for the given time. Thus, the indicator supports the relief rally theory before prices continue to fall.

MACD indicator: the large spread between the fast and slow line highlights the aggressive selling pressure in the market. Moreover, these slopes are on the verge of falling below the neutral zone, indicating further confirmation for extended decline.

• Resistance level – $22580 and $25000
• Support level – $207850 and $19000