Bitcoin Not Out of the Woods? BTC Price Forms Bearish Weekly Pattern 9

Bitcoin Not Out of the Woods? BTC Price Forms Bearish Weekly Pattern

Bitcoin (BTC) has just seen its craziest three-day period in literal years. For those who missed the memo, Friday saw the cryptocurrency market catch traders with their pants down, pushing digital assets sky-high in a matter of hours.

At its peak on Saturday, Bitcoin had surged by 42% in a 24-hour period, pushing from $7,300 to $10,500 in a jaw-dropping move, the fourth-largest daily rally in Bitcoin’s entire history and the biggest move of its kind since 2011. Crazy, right?

But, some analysts are floating the idea that the cryptocurrency is not yet out of the woods, despite the absolute intensity of the recent thrust to the upside.

SimpleFX
SimpleFX

Bitcoin Not in the Clear

An analyst going by “888Velvet” on Twitter recently noted that he isn’t convinced by Bitcoin’s recent burst upward. He argued in the tweet below that his analysis indicates that Bitcoin may be trading in a textbook bearish pattern defined by prominent historical technician Richard Wyckoff. As Velvet pointed out, the recent rally, according to Wyckoff’s studies, might just be a “throwback” to a bull trend before an eventual breakdown, defined as a “markdown” by the analyst.

Velvet isn’t the only one floating bearish analysis.

The CME’s BTC futures just printed a massive $1,000 gap between Friday’s close of $8,700 and the weekly open of $9,700. This might not mean anything on its own. But, Bitcoin has had a history of filling the gap, moving down or up to prices where the CME’s market didn’t trade at. Just look to the below chart from Richard Heart, which shows that nearly every single daily CME gap has been filled by BTC in the weeks that followed a gap’s creation.

Also, Bitcoin’s four-hour chart has begun to print an array of bearish divergences, technical signals that precede slight corrections. Of course, there is no guarantee that these divergences will play out, but a short-term drop is surely on the table. And maybe a longer-term correction could follow.

How About the Bulls?

While Velvet and some analysts have their reservations over the recent move, there is also some evidence that shows that Bitcoin’s downtrend has decisively ended. An analyst going by “JB” recently noted that BTC’s three-day chart is printing an array of positive signals: the recent candle can be defined as a “bullish engulfing candle,” a descending trend line that originated at June’s $14,000 top was broken, markets have seen their biggest volume day in months, the MACD is printing a bullish divergence, and the Willy indicator is now leaving oversold territory.

Photo by Jonatan Pie on Unsplash