Key Points:
Bitcoin faces the risk of a deep pullback to the $88,000-$94,000 range after breaking out of an ascending wedge.
The double top pattern similar to 2021 is increasing the likelihood of BTC dropping below $100,000.
Since hitting a historic high of over $124,500 four days ago, BTC has retraced nearly 8%. Currently, due to the emergence of a typical bearish reversal pattern, BTC faces further downside risk.
Analyst Captain Faibik pointed out that BTC has confirmed a breakout of the ascending wedge pattern on the daily chart.
Traditional analysts view the ascending wedge as a bearish reversal structure, typically signaling a sharp decline, especially after a sustained uptrend. For Bitcoin, this wedge has been forming since April, characterized by higher highs and higher lows, gradually compressing towards the apex.
Analysts state that a break below the wedge's support trendline indicates that BTC's recent resistance level turning into a support level will be tested, suggesting that its momentum is weakening and selling pressure is increasing.
They emphasize that the recent support level is in the $110,000-$112,000 range. Once this range is breached, the price may further decline to the $105,000-$108,000 range.
If selling pressure intensifies, BTC could expand its decline to the critical psychological level of $98,000-$100,000 before September, representing a 20% pullback from recent highs.
The breakout target of the ascending wedge is typically calculated by subtracting the maximum height of the structure from the breakout point.
Applying this method to the Bitcoin chart, its downside target could be as low as $88,000, as shown in the diagram below.
If BTC can maintain strength above the 50-day exponential moving average (50-day EMA), this bearish scenario will be invalidated. This moving average has been a strong support area during BTC's rise of over 50% since April.
In this case, its price could rebound to around $125,000 near the upper trendline of the wedge before September.
BTC's weekly close shows a potential double top pattern, similar to the situation in 2021. This bearish reversal pattern is characterized by two consecutive peaks at the same price level, indicating that market momentum is weakening.
In 2021, this pattern foreshadowed a subsequent 77% deep pullback, with BTC dropping from about $69,000 to below $16,000 in the following months.
Analyst Swissblock noted that unless the price quickly reverses, a similar pattern currently also increases short-term downside risk.
If the double top scenario plays out like in 2021, BTC could fall back to near its 50-day exponential moving average (red wavy line) around $94,750 by September.
Since June 2023, the 50-week exponential moving average has been functioning as a strong accumulation area.
On-chain indicators for Bitcoin further reinforce the expectation that prices may continue to decline in the coming weeks.
According to data analysis platform Glassnode, the number of whale addresses holding over 10,000 BTC has dropped to its lowest level this year, with a continuous negative change over the past 30 days since mid-July.
The number of whale wallets holding 1,000 to 10,000 BTC has also decreased, reflecting that these large holders have taken profits near Bitcoin's recent highs.
Combined with the downside breakout of the ascending wedge and weakening technical indicators, this whale-driven selling pressure increases the risk of a broader pullback unless strong spot demand can return to the market.
There is a significant difference between the 2021 and current BTC price cycles.
In 2021, Bitcoin peaked as the Federal Reserve began tapering bond purchases and shifted to quantitative tightening (QT). In this cycle, according to CME data, there is a high likelihood of a 25 basis point rate cut by the Fed in September.
Additionally, the continuously growing global money supply (M2) suggests that BTC is expected to reach a price target of $132,000 in the coming months. Some analysts even predict that BTC prices will climb to $170,000.
Swissblock stated that this liquidity shift could offset technical weakness in the short term, thereby maintaining BTC's overall upward trend.
Related: Bitcoin (BTC) enters "mild danger zone," investor profit-taking sentiment rises.
This article does not contain any investment advice or recommendations. Any investment and trading activities involve risks, and readers should conduct their own research before making decisions.
Original article: “Bitcoin (BTC) Price Rising Wedge Breakdown: How Low Can Bitcoin Go?”
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