Bitcoin has suffered its largest price drop since 2013 following the announcements from the WHO that the coronavirus is a pandemic and President Trump banning flights between the US and Europe, heightening selling across broader financial markets.
Yesterday, the downside in Bitcoin dramatically accelerated after sellers broke the December 2019 low, around the $6,430 level. The breach of this key support barrier signaled that the flagship cryptocurrency was unlikely to rebound, and triggered an increase of technical selling pressure behind it.
Altcoins also incurred heavy losses. The notable losers were Ethereum (ETH), Bitcoin Cash (BCH), and XRP, which all suffered losses of nearly 50%.
Finding Support in Crypto Markets
From a technical perspective, the breach of the December 2019 low invalidated a bullish inverted head and shoulders pattern across the higher time frames with a $4,000 upside target.
According to technical analysis, the invalidation target should be equal to the size of the pattern, which means that BTC/USD could be on course to drop towards the $2,400 technical area.
One thing is for sure, the drop below the December 2019 low has significantly changed the medium-term outlook for Bitcoin, and may encourage traders to sell any rallies in the cryptocurrency.
Where to Next for Bitcoin
Today’s plunge below the $5,000 level has seen Bitcoin test major trendline support on the weekly time frame. The weekly time frame shows Bitcoin has been trapped within a huge triangle pattern over recent months.
With this in mind, the bottom of the triangle is found at the $4,700 level. Price briefly breached the triangle earlier today, however, BTC has seen a sharp move back inside the triangle at the time of writing.
Daily price closes below the $4,700 level would be a major bearish development for the number cryptocurrency, and could provoke the next wave of technical selling towards the $3,000 and possibly the $2,000 levels.
Failure to hold price below the triangle pattern may encourage the notion of a false downside breakout and may trigger a bounce back towards the $6,000 technical area.
Traders Remain Fearful
Veteran trader Peter Brandt, who is famous for calling major tops and bottoms in a number of asset classes has said that Bitcoin could fall towards $1,000 before recovering.
Brant, who is a prominent voice on Twitter said looking at a Bitcoin chart “without bias” the new bottom for the flagship cryptocurrency could be “sub-$1,000”. That’s an alarming fall from current levels and a key technical area that Bitcoin has not revisited since April 2017.
Bitcoin’s price plunge has caused the Crypto Fear and Greed Index (CFGI) to hit its lowest level of the year so far. This key fundamental indicator is worth watching as it can signal key turning points in the crypto market.
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