BTCUSD - Looking Very Bearish to me at Least in the Short Term
So first I should say again that longer term (years) I remain bullish on cryptocurrencies. I really believe the technologies behind them are changing our world and will continue to do so for many years to come.
Having said that though in the short term (weeks or months) I have to say that the chart patterns I see on at least the major coins and tokens look pretty bearish to me.
Looking at Bitcoin here what I see is a symmetrical triangle forming during a downtrend. While it is possible for the symmetrical triangle to mark important trend reversals, which in this case would mean a breakout to the upside.
In most instances, though the symmetrical triangle is a continuation pattern which unfortunately would mean more downside for Bitcoin. Symmetrical triangles also indicate a period of indecision in the market which plays out as a pattern that moves sideways as bulls and bears fight for dominance.
As you can see by the chart we are seeing classic signs of the symmetrical triangle or contracting wedge, there is the continued tightening or coiling of the consolidation pattern along with decreasing volume as the pattern tightens
and pressure builds so when the breakout does occur you can usually expect it to be accompanied by a large spike in volume.
Generally, with a symmetrical triangle, the breakout will occur near the 1/2 or 3/4 point of the pattern, to me, it looks like we are very near the 3/4 point so I would say a breakout is imminent.
As far as a target price, one way to calculate it is to take the widest distance of the triangle and in the case of a breakout to the downside subtract it from the breakout point. In this case, it looks like the widest distance is about
$6600 so if the breakout point was at say $7000 that would put the downside target at $400. I have to say that I just don't see that happening, I have a hard time believing that the price of Bitcoin would ever get that low. As of now I believe there is enough buying support to keep the price much higher than that. In my opinion if we do breakout to the downside and re-test the $6000 price level and this time it does not hold I could see the price dropping to maybe the $2000 to $4000 level before forming a bottom, but as of now I just don't see the price going much below that.
In a chart I published at the end of March (below) I compared the current boom and correction cycle Bitcoin is going through with the boom and correction cycle that occured toward the end of 2013 and lasting through 2014.
Although this correction has happened much quicker, (the 2013/2014 cycle took over a year to bottom) if we end up seeing a similar ultimate percentage drop that would put a bottom this time in the $2000 to $4000 area.
An alternative and a more neutral scenario would be for Bitcoin to breakout to the downside and re-test the $6000 level which ends up holding. In this scenario I could envision a possibility where Bitcoin could create a trading channel between $6000 and say $10,000. Bitcoin would then consolidate in this range over a period of time creating a bottom before at some point starting a new bull market.
In closing I would say the third but maybe more unlikely scenario is that Bitcoin does in fact breakout from this triangle to the upside. I personally would prefer this scenario and I only say it is unlikely because most symmetrical triangles play out as continuation patterns and since we have been in a downtrend the odds are to the downside. Either way as I said before longterm I still remain bullish on cryptocurrencies and look forward to the next bull market.
Having said that though in the short term (weeks or months) I have to say that the chart patterns I see on at least the major coins and tokens look pretty bearish to me.
Looking at Bitcoin here what I see is a symmetrical triangle forming during a downtrend. While it is possible for the symmetrical triangle to mark important trend reversals, which in this case would mean a breakout to the upside.
In most instances, though the symmetrical triangle is a continuation pattern which unfortunately would mean more downside for Bitcoin. Symmetrical triangles also indicate a period of indecision in the market which plays out as a pattern that moves sideways as bulls and bears fight for dominance.
As you can see by the chart we are seeing classic signs of the symmetrical triangle or contracting wedge, there is the continued tightening or coiling of the consolidation pattern along with decreasing volume as the pattern tightens
and pressure builds so when the breakout does occur you can usually expect it to be accompanied by a large spike in volume.
Generally, with a symmetrical triangle, the breakout will occur near the 1/2 or 3/4 point of the pattern, to me, it looks like we are very near the 3/4 point so I would say a breakout is imminent.
As far as a target price, one way to calculate it is to take the widest distance of the triangle and in the case of a breakout to the downside subtract it from the breakout point. In this case, it looks like the widest distance is about
$6600 so if the breakout point was at say $7000 that would put the downside target at $400. I have to say that I just don't see that happening, I have a hard time believing that the price of Bitcoin would ever get that low. As of now I believe there is enough buying support to keep the price much higher than that. In my opinion if we do breakout to the downside and re-test the $6000 price level and this time it does not hold I could see the price dropping to maybe the $2000 to $4000 level before forming a bottom, but as of now I just don't see the price going much below that.
In a chart I published at the end of March (below) I compared the current boom and correction cycle Bitcoin is going through with the boom and correction cycle that occured toward the end of 2013 and lasting through 2014.
Although this correction has happened much quicker, (the 2013/2014 cycle took over a year to bottom) if we end up seeing a similar ultimate percentage drop that would put a bottom this time in the $2000 to $4000 area.
An alternative and a more neutral scenario would be for Bitcoin to breakout to the downside and re-test the $6000 level which ends up holding. In this scenario I could envision a possibility where Bitcoin could create a trading channel between $6000 and say $10,000. Bitcoin would then consolidate in this range over a period of time creating a bottom before at some point starting a new bull market.
In closing I would say the third but maybe more unlikely scenario is that Bitcoin does in fact breakout from this triangle to the upside. I personally would prefer this scenario and I only say it is unlikely because most symmetrical triangles play out as continuation patterns and since we have been in a downtrend the odds are to the downside. Either way as I said before longterm I still remain bullish on cryptocurrencies and look forward to the next bull market.