Bitcoin (BTC) has rallied over the last 5 days, gaining a remarkable $7,600 and reaching the top of its bull flag at $66,500. However, the price rally stopped just short of a new local high, and momentum indicators are showing a potential top. Is the $BTC price now going to reverse, and how far down could it go?
Things still looking good for Bitcoin
Things are still looking good for Bitcoin. China has announced more easing to come, which will also bring more liquidity into the global monetary system as a whole, while other central banks will no doubt be following suit.
The U.S. Spot Bitcoin ETFs raked in a whopping 8.85K BTC on Monday, which in dollar terms is around $555.9 million. This is the largest single net inflow day since early June, and is nearly 20 times the daily issuance of newly mined Bitcoin.
Larry Fink, CEO of Blackrock, the largest holder of Bitcoin among the U.S. ETFs recently said that Bitcoin was an asset class in itself, and predicted that the alpha cryptocurrency will become “as big as the US housing market”, and this no matter who wins the presidential election.
$BTC faces rejection
All this said, from a technical analysis perspective, possibly affecting the short to medium term, Bitcoin (BTC/USD) is at a very critical juncture. If this current rally is rejected once again from the top trend line of the bull flag, there is the potential for another downside swing, and how far could this drop the price?
Source: TradingView
The 4-hour chart for $BTC displays the breakout of the descending trend line on Monday. The price shot up pretty quickly from the breakout, making 5.3% before coming to a halt at the upper trend line of the bull flag (bold descending line).
On top of the rejection, the price also failed to make a new local high, which if this stands, could make the rejection even more telling. Looking at the potential downside, the Fibonacci levels for this move are pointing to $63,600 at the 0.382, $61,800 at the 0.618, and $60,500 at the 0.786. There is also the possibility that the price comes down to retest and confirm the breakout trend line.
Price dip on the way?
Looking at the more positive side of things, it can be seen that the $BTC price appears to be making another attempt to claw its way back to the top of the flag. It’s possible that the bulls could be successful, and that the price is able to make a local higher high, and even break through the top of the bull flag, but the Stochastic RSI momentum indicator is showing a top on all the short term time frames. It is for this reason that the price is probably more likely to dip in the next few hours.
$BTC at huge resistance
Source: TradingView
On the weekly time frame, it can be seen how the current horizontal resistance level at around $65,700 coincides with the top of the bull flag. With the short term momentum just about exhausted, this really adds fuel to the bears.
At the bottom of the chart, the weekly Stochastic RSI is still showing that cross down. If the rejection now takes place, this cross down is likely to become more marked, and the third fake-out of this indicator could be about to take place.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
