Bitcoin: Why won't the rainclouds go away?
Here's my analysis of the current situation and my prediction of what could be in store for us, based off what Bitcoin has done in the past.
-I've noticed that many massive capitulation red candles were preceded by failed attempts to penetrate a level of resistance a very short time before the crash (i.e. early march breakdown from 11.7k and 10.7k). In this case, Bitcoin failed to break 6.5k and hours later broke below the 6k support. This isn't really useful because it's trivial to see those things in hindsight, but I thought it was kinda interesting.
-It's common for breakdowns of descending triangles to retest the bottom of the triangle before the downtrend continues, as discouraged bulls capitulate after being unable to break support that has now turned into resistance. This happened back in the first bear market after the breakdown below the $300 support, and several times this year, the most prominent being the retest and subsequent rejection of 13k after the break below it in mid-January.
Therefore, I expect a hanging head/gravestone doji pattern to form, where bulls slowly push BTC up to 6k before it is confirmed as resistance when they are unable to close above 6k, signalling the start of the next wave down. That would also match what Elliott Wave Theory states: the 3rd wave is usually the largest wave and confirms the existence of the trend.
Note that this retest may never happen or we may continue going down further before a possible retest of the former 6k support instead of going up in the manner this chart depicts. This chart isn't exact by any means.
-Some people are claiming the current major chart pattern is a bullish falling wedge, as opposed to a bearish descending triangle.
However:
Therefore, I expect the current downtrend to continue.
-I've noticed that many massive capitulation red candles were preceded by failed attempts to penetrate a level of resistance a very short time before the crash (i.e. early march breakdown from 11.7k and 10.7k). In this case, Bitcoin failed to break 6.5k and hours later broke below the 6k support. This isn't really useful because it's trivial to see those things in hindsight, but I thought it was kinda interesting.
-It's common for breakdowns of descending triangles to retest the bottom of the triangle before the downtrend continues, as discouraged bulls capitulate after being unable to break support that has now turned into resistance. This happened back in the first bear market after the breakdown below the $300 support, and several times this year, the most prominent being the retest and subsequent rejection of 13k after the break below it in mid-January.
Therefore, I expect a hanging head/gravestone doji pattern to form, where bulls slowly push BTC up to 6k before it is confirmed as resistance when they are unable to close above 6k, signalling the start of the next wave down. That would also match what Elliott Wave Theory states: the 3rd wave is usually the largest wave and confirms the existence of the trend.
Note that this retest may never happen or we may continue going down further before a possible retest of the former 6k support instead of going up in the manner this chart depicts. This chart isn't exact by any means.
-Some people are claiming the current major chart pattern is a bullish falling wedge, as opposed to a bearish descending triangle.
However:
- Some of them ignore the wick on the Feb 6 low so they can curve their support line downward
- The last few times BTC broke below the 6k support, it didn't stay there for a very long time. The first 6k break only happened on a couple exchanges like GDAX, and BTC was only under it for a hour or so. Later breaks were on much lower volume and were near the end of a downtrend with bullish divergence on indicators. In contrast, this break was after months of moving sideways along support and well, we're obviously at the start of a downtrend. This is the longest period of time we've spent below 6k this year, as previous breaks only had wicks below 6k on the daily or the next candle closed above 6k.
- A falling wedge indicates the weakness of the bears. However, bullish events like the FUD that triggered the early September fall being proven false and the entry of Bakkt/Fidelity into the crypto scene eliciting no positive response from bulls reveals their weakness and lack of ability to push the price up even with the news on their side. This can be contrasted to the frenzy in early December, where bearish news like Steam no longer accepting Bitcoin was shrugged off by traders.
Therefore, I expect the current downtrend to continue.
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