Bitcoin (BTC) is trading within a symmetrical triangle and a descending triangle at the same time. It has to break out in the weeks ahead. The bulls expect it to break higher while the bears expect it to break lower. Either way, this is the last phase of this tug of war between the bulls and the bears. After this, one of the sides will have a clear victory. If we look at the daily chart for BTC/USD, we can see a large descending triangle that is very likely to break to the downside this time. Some investors were surprised when the recent descending triangle invalidation came into effect. We have been calling for this move in our analyses and the reason why that happened was because the market makers wanted to trap in the bulls while hunting down the bears.
We don’t have to go to 2014 to see what is likely to happen to Bitcoin (BTC) this time. I do believe we are likely to see a 2014 styled downtrend from here but we don’t have to base our analysis on that alone. If we look at the BTC/USD chart, we can see that it has run out of room for further upside. I don’t see it rallying even towards $11,000. I think we are likely to see a decline come into effect any time now. The price would consolidate sideways for a while which would make the bulls confident and as a result the longs will stack up perfectly for the market makers to exploit to their advantage. The $10,623 level on the daily chart is a strong support and resistance level that the price has respected. We have now seen a strong rejection off that point which means further downside is likely without the price rallying higher from here.
It is important to realize that lines and patterns on a chart is only a small fraction of technical analysis. There is a lot more to what is happening in the market that should influence your decisions when entering and exiting trades. This is why context is so important. You have to know the reasons why something like a descending triangle is probable to be invalided and when it is probable to come to fruition. The price formed a double top around $11,427 and is now unlikely to rally past that. In fact, it is not even likely to rally past $10,800 from here.
The weekly chart for BTC/USD shows a strong downtrend on the RSI which might soon lead to significant further downside. The S&P 500 (SPX) is now close to declining down to the 200 day EMA as it has closed below the 50 day and 21 day EMAs. The last time that happened, we saw Bitcoin (BTC) break market structure and decline below $6,000 to its December, 2018 lows. If that happens again, the next downtrend is going to be even more devastating which is why I think the downtrend has finally begun and investors that are still holding Bitcoin (BTC) need to be very careful.