Are Bitcoin Prices Headed For Further Losses In The Short-Term?
Bitcoin prices, which have been trading largely between $30,000 and $42,000 for close to two months, have been repeatedly testing the bottom of this range lately.
Earlier today, the world’s most prominent digital currency fell to as little as $30,426.88, according to CoinDesk data.
At this point, it was trading at its lowest since June 26, additional CoinDesk figures show.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Bitcoin’s Descending Triangle
Chuck Jones, a senior contributor for Forbes, wrote about the cryptocurrency’s recent price movements in an article published today, noting that bitcoin recently formed a descending triangle.
“The descending triangle is a bearish formation that usually forms during a downtrend as a continuation pattern,” according to StockCharts.com.
These formations are “bearish patterns that indicate distribution,” or selling of an asset.
An Investopedia article provides further info, stating that:
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“Descending triangles are a very popular chart pattern among traders because it clearly shows that the demand for an asset, derivative or commodity is weakening.”
“When the price breaks below the lower support, it is a clear indication that downside momentum is likely to continue or become even stronger,” the piece added.
Analysts Weigh In
Several experts spoke to this situation, offering some key technical analysis that investors might use.
“There definitely is a descending triangle on the daily chart,” said Jake Wujastyk, chief market analyst of TrendSpider.
“This is generally looked at as a bearish continuation pattern but can break to the upside in some cases.”
Jason Lau, COO of cryptocurrency exchange OKCoin, also weighed in.
“I would generally agree” that bitcoin has entered a descending triangle, he said.
“However the support levels in the $30k range have held despite repeated tests.”
While Lau spoke to the resilience the digital currency had near $30,000, some analysts emphasized the losses the digital currency could face if it breaks through the support that exists around this key, psychological level.
“If the descending triangle starts to break down through the previous lows, market participants should watch for a move down to the Covid crash anchored VWAP below around $26,500,” stated Wujastyk.
He also emphasized the digital asset’s market history.
“Based on Bitcoin’s seasonality over the last 5 years shown on TrendSpider, August has one of the lowest win rates of the year at 20%,” said Wujastyk.
“This means that since 2016, only 1 of 5 August monthly closes has been higher than the July close.”
“A combination of the bearish technical setup and low win rate for August would suggest a move further down rather than up into the rest of the 3rd quarter.”