Chart of the Day: Why Bitcoin Will Continue to Fall
is up for the sixth straight day of its longest winning streak since March 29, when it rose for eight straight days.
Crypto trader, il Capo Of Crypto tweeted last week that while the price of BTC was falling, there was a pattern of buying interest picking apart pockets of supply. Il Capo predicted that once this unit stopped accumulating, the cryptocurrency would bounce, and it certainly did, by 19%.
Layered Money author Nik Bhatia and Bitcoin Layer analyst Joe Consorti argue that “dormant supply peaks are springboards for upward price action.”
This is an argument favored by crypto traders that a lull in the price of Bitcoin equates to a bottom. They cite the examples of 2016 and 2020 when Bitcoin was quiet and then the price exploded.
I disagree with them, and here’s why:
In 2016, Bitcoin’s bottom set the stage for a large symmetrical triangle, followed by a continued uptrend.
In 2020, BTC bottomed, from where it rocketed to its April 14, 2021, $64,374 all-time high.
In stark contrast to the previous two examples, which followed bottoms, BTC today is looking for a top, and not just any top, but the biggest in its history – $35,000.
Moreover, the price finds resistance below the ascending channel, and bends before the more significant descending channel. Note that the price fell below the 200 weekly moving average (WMA) for the second time since March 2020. It was the first time recorded since September 11, 2017.
However, the weekly price closed slightly below the meter and bounced back the following week. Currently, Bitcoin is below the 200 WMA for the fifth week in a row. Also, the 50 WMA fell below the 100 WMA, even in the middle of this rally.
When Bitcoin falls, I will be the first to say so. According to the principles of technical analysis, the digital coin is on a path that is much lower, a path it has been on since . Price is retesting the broken ascending channel near the top of the descending channel, providing a potentially ideal entry, at least from a risk-reward perspective.
Remember that you should act with a plan that includes timing, budget and temperament. If you don’t know how to compose one, below is a generic example so you can practice learning on your own. The principles of technical analysis are statistically-based resumptions. There is no way to know if this market will follow the statistics. Therefore, before entering the trade, close your eyes and imagine that it lost. If you can’t handle it, don’t enter the trade. The longer you trade consistently, the better your overall trading should be.
Trading strategies
Conservative traders should wait for a new low below June 8 and short a corrective rally demonstrating resistance.
Moderate traders would lack evidence of resistance at these levels.
Aggressive traders could card now.
Trade sample
- Entry: $22,300
- Stop-loss: $23,300
- Risk: $1,000
- Goal: $19,300
- Reward: $3,000
- Risk: Reward ratio: 1:3
Disclaimer: The author currently owns none of the securities mentioned in this article.
