Bitcoin Faces Downside Risk as Technical Indicators Flash Bearish Signals

Source: CryptoNewsNet Original Title: Here’s Why Bitcoin Price Could Plunge Another 20%  Original Link:

Market Overview

The pioneer cryptocurrency Bitcoin recorded a sharp sell-off of over 7% on Monday, plunging to the $85,000 mark after briefly falling to $83,814. Several interconnected factors fueled this downturn including Japan’s central bank signaling tighter policy, cooled expectations for a U.S. Federal Reserve interest rate cut in December, and significant liquidation. The selling pressure led to another lower high formation in Bitcoin’s price, signaling a risk of prolonged correction.

Technical Analysis Warnings

In the last two months, Bitcoin’s price has plunged from $125,725 to its current trading value of $85,000, registering a 33% decrease. Two separate technical warnings from widely followed analysts have added to the bearish sentiment in trading circles.

Crypto enthusiast Lark Davis highlighted that the market capitalization of Tether (USDT), the largest dollar-pegged stablecoin, recently witnessed a bearish crossover in its weekly MACD indicator. Historical examples of this signal on a similar timeframe have preceded sharp drops in dollar inflows into the sector, almost always translating to a Bitcoin decline of between 15% to 21% within the following weeks. The current arrangement is similar to previous episodes, with the USDT supply curve leveling after months of rising.

Separately, veteran chartist Peter Brandt issued a reminder that Bitcoin has been in five major upward parabolic phases since 2009. In all previous instances, after the price pattern broke below the main advancing curve that characterized the bull run, the correction that followed amounted to more than 75% from the peak of the cycle. Brandt emphasized that no previous cycle has deviated from this result, making it exceptional justification for traders to position against a similar move now.

Both observations focus purely on recurring price and on-chain patterns rather than external events. Markets are still digesting the implications as liquidity conditions tighten and leveraged long positions face increased margin pressure.

Downside Risk Analysis

Following a sluggish weekend, Bitcoin’s price printed a sharp intraday downturn, creating a new lower-high formation on the daily chart. A series of such lower swings indicates sell-the-bounce sentiment among market participants, bolstering further correction in price.

With more than a 7% drop, BTC traders witnessed nearly $349 million in long liquidation, pulling more sell orders into the market.

If selling pressure persists, the coin price could plummet another 14.6% and revisit the bottom trendline of a falling channel pattern at $73,600. The chart setup has been carrying steady correction in BTC as price constantly resonates between two parallel lines, acting as dynamic resistance and support.

The potential retest could trigger a brief recovery in Bitcoin’s price to encourage a potential swing towards the resistance trendline. However, until the coin remains within the channel pattern range, sellers could maintain a tighter grip over price trajectory.

A recent bearish crossover between the 100-and-200-day exponential moving average slopes suggests another key sell-signal for market participants. The 50-day slope also acts as an active dynamic resistance in price.