Bitcoin price is showing signs of potential further downside after failing to break through key resistance levels, according to analyst Rekt Capital.
BTC recently closed below the March lows of $78,500 on the daily timeframe. There are also indications that suggest that this former support level could be flipping into resistance.
Historical RSI patterns point to $70,000 Bitcoin price target
Rekt Capital’s analysis focuses on Bitcoin’s historical tendency to develop bullish divergences at cycle bottoms.
Throughout the current market cycle, Bitcoin price has displayed a specific pattern where the RSI forms higher lows while price action creates lower lows during major bottoming periods.
The analyst describes that the initial price low usually forms in conjunction with the initial RSI low.
Yet, the second price low is lower than the initial one while the second RSI low is higher than the first one. This forms a bullish divergence pattern that has led to major reversals in the past.
Historically, the price distance between these two lows has varied from -0.32% to -8.44%. At present, this price distance is -2.79%. If this measure were to expand to the highest seen range of -8.44%, as in mid-2024, Bitcoin might fall to around $70,000.
This level is especially significant because it corresponds with the pre-halving highs and is the post-halving reaccumulation range high. Rekt Capital points out that this would not be the first time in the current cycle that Bitcoin price has come close to the range high of a prior reaccumulation period.
CME gaps and Bitcoin price range breakdown
Bitcoin’s recent price action has been influenced by CME (Chicago Mercantile Exchange) gaps, according to Rekt Capital.
The analyst had previously identified a sideways range fueled by these gaps. However, he notes that Bitcoin has now broken down from this range and formed a brand new weekly CME gap in the process.
“This brand new CME Gap is being treated by price as a new resistance,” Rekt Capital explains. This fits in with technical concepts since CME gaps can also serve as support or resistance areas.
After the breakdown of the range, Bitcoin price has filled up the newly created CME gap and is now indicating rejection from the same level.
Putting the current scenario into perspective, Rekt Capital highlights that the price of Bitcoin has closed below the early March lows of $80,670 on the weekly chart. BTC has lost this level as support.
The upside wick into the underside of this same level, which partially filled the new CME gap, suggests the market is testing this former support as new resistance.
The analyst points out that there are few support levels between current prices and the $70,000 target. This forms what they refer to as a “market inefficiency” that would be filled on confirmed breakdown.
The technical void enhances the likelihood of rapid downside action should Bitcoin not recover the key $80,670 level.
Some Analysts Who Hold A Bullish Outlook
While Rekt Capital offers a bearish outlook, other market analysts have other visions for Bitcoin’s price action. Gert van Lagen holds a bullish long-term position and posited in a recent tweet that Bitcoin is “continuing its bull market after bouncing off the neckline of this 4-year-old inverse Head & Shoulders,” with a target of around $300,000.
Van Lagen points out that Bitcoin price recently probed what he views as the bull market support at $74,800. He lays out that this bullish thesis would be negated only by a weekly close below it.
Trader XO offers a more neutral, range-bound view on shorter timeframes. XO identifies a “strong supply zone at $82,500” with “demand” (support) in the $73,000-$74,000 range.
The analyst viewed the $80,600 level as weekly support/resistance and suggests that Monday’s high and low will likely define the trading range in the near term.
XO also highlights important upcoming economic events that could influence price action. He specifically mentioned CPI data and unemployment claims on Thursday.
