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An overnight sell-off in the Bitcoin market Monday brought its prices down from an intraday high of $34,888 to as low as $31,435.
The approx 10 percent decline occurred as tradersâ anxieties mounted over a JPMorgan report that cast doubts over Bitcoinâs potential to retest $40,000. According to Nikolaos Panigirtzoglou, the lead strategist at JPMorgan & Chase, one of the major catalysts behind Bitcoinâs supersonic rally was the Grayscale Bitcoin Trust, which amassed about $20 billion worth of BTC during its 1,000 percent price rally.
Nevertheless, the last couple of weeks saw a decline in the New York fundâof about 22 percentâthat surpassed Bitcoinâs very own downside correction of 17 percent.
Mr. Panigirtzoglou added that a drop in Grayscaleâs accumulation spree might hinder Bitcoinâs attempt to reclaim $40,000 or the levels above it, adding that âthe near-term balance of risks is still skewed to the downside.â
Bitcoin Descending Triangle
The bearish fundamental risked activating a classic bearish reversal pattern that has emerged on the Bitcoin charts lately. The BTC/USD exchange rate has been forming a sequence of higher lows on repeated upside rejections while holding its footing at a horizontal support area. The pattern appears like a Descending Triangle.
In retrospect, a Descending Triangleâs formation in an uptrend points to a reversal.
Most traders look to open a short position following a high-volumed breakdown from the patternâs lower trendline support. Typically, the price target is as much as the Triangleâs maximum height. In Bitcoinâs case, it is more than $11,000 that puts the cryptocurrency at risk of slipping below $20,000.
Nevertheless, certain adjustments to the support trendline change the entire bearish setup by turning Descending Triangle into a Bull Pennant.
So it appears, Bitcoin has simultaneously formed lower highs alongside the higher lows, forming a Symmetrical Triangle in an uptrend. In retrospect, it is a bullish continuation pattern that could have traders open long positions following a high-volume breakout above the Triangle resistance trendline.
The Pennantâs upside target is as high as the flagpole formed before it (~$20,000). That puts Bitcoin en route to at least $50,000 should the bullish bias sustain.
Bullish Fundamentals
Fundamentals that could trigger Bitcoinâs Bull Pennant include the US coronavirus stimulus, the Federal Reserveâs pro-inflation policies, and a bearish outlook for the US dollar. That has prompted many corporations and investors to seek hedge in Bitcoin due to its similarities with safe-haven gold.
âWeâre talking about Bitcoin over the next three, five, ten years slowly inching away at goldâs market capitalization,â Vijay Ayyar, head of Asia Pacific with Singapore-based crypto exchange Luno, told Bloomberg Tuesday. âIf that happens, you are way over $50,000.â
BTC/USD was trading above $32,000 at the time of this writing.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.