Broadening Wedge Formation of Bitcoin hints at a potential crash below $30,000

  • Post its record  high of $41,986 on January 8, spot BTC/USD was low 11.61% to $33,739 .39 per token by 0639 UTC. 
  • Mr. Vijay Boyapati’s tweet defended the crypto and his observation  stands valid in terms of how Bitcoin will be heading into a week that would witness the unveiling of a new stimulus package.
  • The potential two reasons behind the bearish behaviour of Bitcoin: an Ascending Broadening Wedge and an overextended Relative Strength Index on a weekly timeframe.

The prices of Bitcoin fell evidently this Monday. This came as a surprise post its 12% plunge in the recent session where the US dollar rebounded and the US benchmark yields approached a high level. This also implied a consequential denting of the flagship cryptocurrency’s safe-haven appeal.

After having struck its fresh all-time high of $41,986 on January 8, spot BTC/USD was low 11.61% to $33,739 .39 per token by 0639 UTC. On the other hand, a fall was witnessed by Bitcoin Futures registered on the Chicago Mercantile Exchange by 12.97 percent to $34,360 per contract. This further pointed at enormously lengthy liquidation over the previous day.

The resilience that has emerged in the form of opinions 

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The unexpected plunge led to Bitcoin analysts in a confused state in context of their next price prediction. Scott Minerd, who predicted BTC/USD at $400,000 in the coming times, reflected on how the ongoing uptrend of the pair seems unsustainable in the short-run. He noted that overextended-ness that could hit its price to the bottom.

However, Vijay Boyapati, a significant Bitcoin bull defended the latest price correction of the cryptocurrency. He reminded that all of its uncomfortable bull runs have historically shown a downside graph of 30-40%. He claimed that the upward mood of bitcoin would restart immediately post it manages to grab some sessional support level. 

The new stimulus package on board by Joe Biden

Mr. Vijay Boyapati’s tweet reflecting his prediction has the potential to stand valid in terms of how Bitcoin will be heading into a week that would witness the unveiling of a new stimulus package. 

Joe Biden, the US President-elect, recently informed the media that one of his priorities post his oath-ceremony would be to invest maximum dollars in the growth of the US economy. 

Bitcoin’s investment thesis is being favoured by the fiscal deficits. Just when the US Congress assigned two stimulus bills of the combined value of $3.2 trillion, the cryptocurrency incurred a surge by more than 900%. The US dollar’s appeal saw a reduction leading the investors to look for security in riskier assets, providing direct benefit to the top cryptocurrency.

The bearish technicals of Bitcoin

Bitcoin is hinting at clear symptomatic bearish behaviour in the short-term. 

There could be two primary reasons behind it: an Ascending Broadening Wedge and an overextended Relative Strength Index on a weekly timeframe. 

The recent downside movement of Bitcoin has shifted RSI to a neutral state, though it continues inside an overbought area, hinting at an extended correction lower.

On the other hand, bearish reversal signs can be seen in the Ascending Broadening Wedge as the price experiments with its support of lower trendline for a possible negative breakout. 

The crypto now has an 80% potential of breaking under the Wedge. This is then based on the overall performance of the pattern across conventional markets. The BTC/USD exchange rate  intends to focus on the lowest point of Wedge which is at $24,655, as its potential downside target.

The pair, thus, could try a withdrawal from the lower trendline itself. Further, this could lead to inching towards the upper trendline, accompanied by a breakout. Let us see if the bounce-back would actually happen $26,375 or $29,891 on this breakdown move. Only time will tell.

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Ritika Sharmahttp://www.thecoinrepublic.com
Ritika Kumari Sharma is an Economics Honors graduate from the University of Calcutta. She is completely into finance and believes that cryptocurrencies are the future. She is an enthusiast learner about the cryptocurrency and blockchain technology.

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