Bitcoin emerged victorious in the week that saw its safe-haven rival Gold taking a dip amid decreasing investors’ appetite for risk-off assets.
The benchmark cryptocurrency closed above $16,000 for the first time in three years, a level that traders believe would pave the way for its bull run towards $20,000 — an all-time high. But amid the bullish call came a pinch of warning, stating that Bitcoin would fall back below $16,000 all over again.
A pseudonymous analyst spotted the cryptocurrency in a bearish reversal scenario, based on the assumption that it is trending upward in a Rising Wedge pattern. The technical structure, which begins wide at the low but starts contracting as the price moves upward, thereby narrowing the trading range, is notorious for predicting extreme downside correction.
BTC/USD formed a Rising Wedge—at least to naked eyes—as it traded from as low as $13,450 to as high as $16,491 in November 2020. The uptrend saw the pair leaving behind a trail of higher highs and higher lows, thereby creating a contracting pattern altogether.
Furthermore, Bitcoin’s volume and momentum (RSI) decreased against its rising price. That also fits the criteria of a Rising Wedge formation, pointing to a “deeper” downside correction, as market analyst Michaël van de Poppe noted, as well.
The Bitcoin Breakdown
Technically, Bitcoin should continue higher in the coming sessions, at least until its price reaches the Wedge’s apex — the point where its upper and lower trendlines converge. That means BTC/USD still has fuel to move towards $17,500.
But after that, the pair risks undergoing a breakdown move. As per the Rising Wedge’s textbook definition, it starts with a close below the lower trendline. If the move accompanies a rise in trading volume, then it extends further to the downside. The primary bearish target of a Falling Wedge, in this case, is equal to the maximum length between its trendlines.
That is nearly $2,244, which means that BTC/USD can fall to as low as $15,500 if the breakdown begins at $17,500. Nevertheless, a premature negative breakout move risks crashing the pair towards or below $15,000.
The pseudonymous analyst noted that the price could fall to as low as $14,800, adding that there is “a lot of greed and FOMO to unwind.”
Conversely, invalidation of the Rising Wedge would increase Bitcoin’s potential to retest $20,000.