The bitcoin (BTC) price made a bearish breakout from a long-term pattern on May 10. After it turned into resistance on May 23, the rate of decline accelerated sharply
Although a rebound may occur in the short term, price dynamics and wave analysis of the daily chart indicate that BTC is still a long way from reaching the bottom.
BTC resumes falling after bearish breakout
As the results of technical analysis show, bitcoin made a break of the head-and-shoulders pattern, which is considered a bearish.
After the formation of the second shoulder there is usually a fall and a breakdown of the neckline, which is what happened in the case of BTC.
After the bearish breakout on May 10, the price was stomping around for about two weeks just below the neckline of this pattern.
Then, on May 23, it confirmed the line as resistance (red icon) and fell sharply. This confirmed the breakout.
In addition, the Relative Strength Index (RSI) is showing a bearish mood as it is below the 50 mark and declining.
It is a momentum indicator indicating overbought/oversold and bullish/bearish market sentiment, depending on whether it is above or below the 50 mark. In the case of BTC, it indicates a bearish trend
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When BTC will stop falling
In the meantime, wave analysis of the shorter timeframe also supports a scenario of further bitcoin decline.
First of all, the price dynamics suggest that if the bearish breakout has the same length (white) as the head-and-shoulders pattern, the price will bottom around $24,000.
Second, the wave analysis indicates that the price is in a complex W-X-Y corrective structure. If this calculation is correct, the price will bounce in the short term and then fall again.
Finally, in the area between $23,200 and $23,900 there is a convergence of Fibonacci support levels formed by the short-term Fibo level of 0.618 (white) and the long-term Fibo level of 0.5 (black).
Fibonacci levels are traditionally considered the most probable springboards for stopping and reversing the price after a significant advance in any one direction.
As expected, at these levels, the market can win back some of the distance traveled and only then resume the movement in the original direction.
In addition, they can determine the limits of the price movement.
Despite this bearish outlook for the BTC price, a close above $30,000 would mean that the currency’s long-term trend is still bullish.
In that case, the price could move towards the next major resistance at $35 000.