Classic technical indicator foresees another massive Bitcoin price drop with $16K target

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Bitcoin (BTC) has rebounded by greater than 25% after bottoming out at $30,000 through the Could 19 crash. However the cryptocurrency continues to tread forward below the opportunity of going through one other interval of sturdy sell-offs owing to a traditional technical indicator sample.

Bitcoin worth in a “bearish pennant”

Dubbed a “bearish pennant,” the sample kinds when an asset consolidates after a powerful transfer downward and kinds a small symmetrical triangle-like worth vary. It breaks under the vary help and continues transferring decrease. Merchants normally estimate the scale of the damaging breakout transfer by measuring the peak of the sooner transfer.

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Bitcoin is at the moment buying and selling inside an analogous bearish pennant construction, fluctuating sideways because it kinds a sequence of decrease highs and better lows. In the meantime, its consolidation construction precedes a large transfer downhill to round $20,000. Due to this fact, if the BTC/USD trade charge breaks under the pennant construction and is accompanied by rising commerce volumes, its probability of crashing by virtually $20,000 is excessive.

The bearish outlook additionally borrows cues from Bitcoin’s latest bounce. It’s worthy to take discover that the price to buy 1 BTC fell from almost $65,000 to $30,000 on Could 19 — or by over 50% — adopted by a considerable 30% bounce.

Bitcoin pennant construction and its major draw back goal. Supply: TradingView

In the meantime, market analytics service Earnings Machine is warning of a “dead cat bounce” situation rising within the Bitcoin market, noting that upcoming rallies in BTC/USD may face limitations by additional promoting strain close to the Could 26 highs (the $39,000–$41,000 space). It beneficial merchants exit their bullish positions close to $40,000.

What’s extra, Earnings Machine additionally noted {that a} failure to carry $30,000 as help would danger crashing Bitcoin costs to $16,200 — a stage that coincides with the bearish pennant goal. The analytics agency chosen $16,200 due to its historic relevance as help through the November–December 2020 session.

Bitcoin bearish outlook offered by Earnings Machine. Supply: TradingView

“Conversely, an upside break of the Could 26 highs would trigger us to reverse our evaluation and undertake a extra bullish outlook for BTC-USD,” added Earnings Machine analysts.

Pankaj Balani, chief government and co-founder of crypto derivatives trade Delta, additionally anticipated an prolonged bearish breakdown ought to Bitcoin’s worth shut under $34,000. However, the previous UBS official restricted his draw back goal to $28,000, 2021’s lowest stage. He advised Cointelegraph:

“Merchants can be keenly watching these ranges earlier than taking any decisive motion. That stated, the chance to the Bulls stays larger in comparison with that of Bears, as longer-term worth motion is in a downward course.”

Bullish outlook

Balani additionally famous that the present worth motion signifies demand within the $30,000–$35,000 vary. Due to this fact, an upward swing from the stated space may find yourself breaking the bearish pennant — which Balani known as a symmetrical triangle — to the upside.

“BTC is forming a traditional symmetric triangle and any breakout/breakdown will result in a big worth transfer,” he stated, including:

“If BTC breaks out of $40K conclusively, a transfer to $45K could be anticipated.”