Bitcoin price at risk of $30K retest following bearish triangle breakdown
The Bitcoin price has been largely effective at holding above $6,700 over the last few months, and investors have been looking for every reason to believe that the current uptrend will continue. The latest in that string of bullish developments has been a breakdown of support at the $6,600 region, which has seen prices drop below $6,300 this morning.
Cryptocurrency markets and prices were hit on Wednesday, after a sharp drop during the early European trading hours. While the price recovered a little during Asian hours, the largest digital currency by market cap has been in a negative trend for most of the day, and it looks as if the current downtrend might be continuing.
The price of bitcoin (BTC) seems poised to retest the $30,000 level now that traders are not betting higher in a bearish technical environment.
This structure, called a symmetrical triangle, is formed when an asset oscillates between two converging trend lines.
The value rebounds after testing the lower trend line of the Triangle as support and pulls back after testing the upper trend line as resistance. Finally, it leaves the range in the direction of the previous trend and drops by an amount equal to the maximum distance between the upper and lower trend lines of the triangle.
Bitcoin was in a similar triangular consolidation pattern until it finally broke below the lower trend line of this pattern. As a result, the chances have increased that the flagship cryptocurrency will reach its target around $30,000. Part of the reason for this is that the high of the structure did not reach $2,550, and subtracting it from the breakout point (~$33,878) yields a price target around $31,308.
Bitcoin has formed a sequence of bearish and bullish reversal patterns and is consolidating between the $30,000 and $40,000 price range. Source: TradingView
The bearish sentiment was also evident when bitcoin tested $32,334 as tentative support early in the London session on Thursday. A small rebound followed, pushing the price above $32,600. However, the rebound lacked additional upside confidence due to the bearish divergence between price and volume, indicating the possibility of bitcoin resuming its downtrend.
Peter Brandt, CEO of Factor LLC, an international trading firm, also suggested a drop to $30,000, but with a different metric. The veteran trader noted that BTC/USD prices are in a rectangle pattern, a price block that has kept bitcoin in medium-term bias contention lately.
Bitcoin is stuck in a rectangle. Source: Twitter, @PeterLBrandt
Price traded in the middle of the rectangle after pulling back from upper trendline resistance. Such a move usually causes the BTC/USD spot price to fall towards the lower support level of the rectangle, which coincided with $30,000.
Unfavorable macroeconomic indicators have partly fueled the recent drop in bitcoin price.
Among them are the minutes from the Federal Reserve’s meeting, which were released Wednesday at about 2:30 p.m. Eastern. As expected, Fed officials have hinted that they may end support for the economy sooner than expected.
Several participants stated that, given the incoming data, they expected the conditions to begin slowing the pace of asset purchases to be met a little sooner than they had expected during previous meetings, the minutes said.
The Fed’s new dot plot predicts a rate hike in 2023. Source: Bloomberg
Bitcoin tends to benefit from lenient monetary policy.
The cryptocurrency rose from a low of $3,858 in March 2020 to $65,000 in mid-April 2021 when the Fed lowered the federal funds rate to near zero, hurting the dollar’s purchasing power, and began buying up $120 billion a month in Treasury bonds and mortgage-backed securities, driving down yields.
Let’s be clear: Central banks’ asset purchase programs create inflationary pressures as they hope to monetize some of the government’s deficits. These purchases drive up the price of equities and fixed income investments. Combined with cheaper credit, soft money programs increase fiat liquidity in the system, reinforcing bitcoin’s superiority as a store of value over an unlimited supply of dollars.
As a result, investors have turned to riskier and safer assets, including bitcoin, in search of higher returns. But once fears of the Fed’s futures cuts began to weigh on the markets, bitcoin began to fall. On Wednesday, bitcoin fell from over $35,000 shortly after the minutes of the central bank’s meeting were released.
Bitcoin reacts negatively to the minutes of the June Fed meeting. Source: TradingView.com.
John Miller, a financial analyst associated with Seeking Alpha, noted that the Fed’s hawkish views will thwart Chairman Jerome Powell’s goal of strong long-term monetary accommodation. In the closing minutes, Powell also called the US economic recovery weak, pointing to weak job growth in June.
The Fed’s accommodative balance sheet policy will continue to provide more liquidity in the banking system and support asset prices, Miller writes.
Cryptocurrencies and crypto assets with strong store-of-value dynamics, such as. B. Bitcoin, will thrive in this environment.
Alex Veledinsky, owner of cryptocurrency cash and derivatives exchange Digitex Ltd, expects bitcoin to remain at $30,000 amid ongoing inflation concerns. He said:
Key support at $30,000 could easily be overtaken by a rally to more ambitious price points toward $50,000 – $70,000 in the medium to long term.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and every transaction involves risk. So you need to do your own research before making a decision.
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