Bitcoin’s administered one of the most volatile weeks in 2020. After clocking in a new high of $12,400 for the year, the asset’s correction downwards has taken the industry on a backfoot. While many suggested such a correction is a healthy part of a bull run, a drop close to $1000 has raised a lot of eyebrows, suggesting that the rally till $12,400 was effectively a bull trap for a massive price drop. With Bitcoin currently valued at $11564, we analyzed the markets and understood that the digital currency is possibly at a tipping point in the market.
Bitcoin 1-day chart
Since the start of August, Bitcoin has attained an ascending channel pattern that symbolizes an eventual bearish breakout. Until now the valuation has oscillated between both the trend lines but at the moment, it is very near towards a pattern breach. The important resistance for Bitcoin stands at $12,011 which was briefly breached on 17th August but the asset dropped below within 24-hours.
Now, considering the bearish pullback does take place, the situation may pan out in the following two ways.
Bitcoin has immediate support at $11150 that was tested once early in August. Since then the asset had been able to maintain a position above. Now if BTC does break out of the pattern, if the support at $11,150 is held, Bitcoin could nurse a quick turnaround and re-test resistance at $12,000.
However, if the selling pressure sustains, Bitcoin may inevitably drop down to support at $10,500 before picturing any form of recovery. Right now, the bearish divergence created between Bitcoin rising prices and falling trading volume is a major red signal. With Relative Strength Index trailing down as well, Bitcoin main actually dropped down to $10,500 after the pattern breach has taken place.
Bitcoin 4-hourly chart
For extensive analysis, we studied the 4-hour chart as well, and even though the 4-hour chart attained a bullish broadening channel pattern, the 50-Moving Average continued to trail above the price. Since attesting a bullish rally on 17th August, the 50-MA has acted as a strong overhead resistance. For Bitcoin to entertain any bullish rally at the moment, this over-head resistance needs to be turned around otherwise, a correction phase is all that seems to take place on the horizon.