Bitcoin (BTC) price recovered more than 25 percent after falling as low as $30,000 on May 19. However, based on a traditional technical indicator data, the cryptocurrency is likely to face new selling pressure.
Bitcoin price inside the ‘bear pennant’
The technical pattern, called a “bearish pennant”, is observed when the price of an asset consolidates after following a strong downward move and forms a small symmetrical triangle-like price range.
If there is a break below the support in this formation, traders usually expect a drop on the scale of the high of the previous move.
Bitcoin is currently trading within a similar bear pennant. While the bottom prices are rising relatively, the hills are going down. According to this model, if the BTC/USD pair falls below the pennant structure and the trading volumes follow the trend in this process, the probability of falling to $20,000 will increase.
Meanwhile, it is worth noting that the cost of purchasing 1 BTC fell from almost $65,000 to $30,000 on May 19, a 30 percent jump after seeing a drop of over 50 percent.
Market analysis service Income Machine has warned of the possibility of a “dead cat bounce” scenario in the Bitcoin market. He made a statement that the rallies to be seen in the BTC/USD parity will be limited by the selling pressure that will occur. In his statement to investors, he suggested they close their positions around $40,000.
Income Machine also noted that if the $30,000 support fails, Bitcoin price risks falling to $16,200. The analytics firm points to $16,200 to work as a support during the November-December 2020 period.
Income Machine analysts also added, “Exceeding the peaks observed on May 26 paves the way for us to reverse our analysis and look more optimistically for the BTC/USD pair.”