When you see Bitcoin’s price drop to below $7,000, technical analysis shows that BTC is falling from the trend line. Back like March 16, 2020.
Despite this highly anticipated Bitcoin Halving on May 15, 2020. Traders predict that there will be a massive pullback. This is because there are several main reasons. On the other hand, the market will use relief in the short term.
In the first case Bitcoin has broken through a major trend line indicating overhead resistance and in the second, a pattern of lower highs on the high-time chart.
Challenging Bitcoin to Recover on a Straight Line from Nearest Capitulation
Despite the theory that Bitcoin price should not fall below $4,000 during the so-called “black swan” event on March 12, 2020, BTC did jump from $3,600 to $6,900 within a month and a half.
A price increase of as much as 91% in exactly 40 days is a substantial price increase even on high volatility Bitcoin and is well known to many investors.
When the price of Bitcoin rises very sharply in a short period of time without any major pullbacks, it is often prone to significant retracements. As seen in October and December 2019, Bitcoin price can spike up to 100% and still fall back to where it started rallying faster than the price move upwards.
Various momentum oscillators suggest Bitcoin price has room for a relief rally in the near term, possibly to the $7,100 to $7,200 range. However, the formation of the lower low of the daily chart of Bitcoin price suggests buyers are starting to lose control of the market.
For the first time since Bitcoin’s price dropped to $3,600 last year, BTC’s daily chart is printing a record lower than its lowest level. Furthermore, before the rejections at $7,400 and $7,200 occur respectively, this shows that buying activity is clearly more dominant than selling activity in the Bitcoin market.
The downward dip was very small and re-buyed quickly, arguing that orders against buying power dwarfed sell orders on both spot and futures exchanges. However, the massive rejection of $7,400 then reversed the trend and created a difficult environment for buyers to maintain their dominance.
As Cointelegraph reported last week, the technically bearish-looking structure imprinted on the Dow Jones Industrial Average with this display of the TD9 selling indicator could add selling pressure to most high-risk assets, including Bitcoin.
There are several variables to prevent major accidents from happening
While some key technical analyzes still look bearish, two other fundamental factors could prevent Bitcoin from re-testing its near-term $4,000 lows and stabilizing the market again.
First, the inflow of capital into Tether increased rapidly. Tether is the most widely used stable coin in the global market. If billions of dollars of Tether were to enter exchanges like example Binance which started re-entering the cryptocurrency market and creating new flows into Bitcoin, this could protect BTC from more downside.
Second, the rise of alternative cryptocurrencies such as Ethereum and other exchange tokens is in line with the rise of BTC in recent events.
Both factors indicate potential existing investors are willing to take more risks as they become more confident about market trends and protect Bitcoin from falling again in the coming weeks.