In case some of our readers are unaware, currently, there is a huge Bitcoin dump spilling blood in the market. During the last 28 hours, BTC lost 14% of its valuation. Just like we predicted, 4 days ago, the price has plummeted as a confirmation of one of two formations.
Nevertheless, there are some positive signs. At least, in the short term, therefore, let’s get straight to it.
Are miners dumping Bitcoin? Fundamental analysis
Recently, a popular crypto analyst, Willy Woo took to Twitter to publish his opinion. He stated that we have never been so close to halving in a bearish setup.
His point was reaffirmed by the fact that lesser miners started capitulating in the midst of already diminished profits. Obviously, there is some truth in that as the selling pressure is evidently increased. This, of course, leads to a further price decline caused by the newly created FUD.
While all this may be true, we can easily say that the recent BTC problems came into being because of the recent Bitcoin’s formation. Simply put, Bitcoin is in bearish formation. Consequentially, miners don’t have an incentive to hold to their coins waiting for a reversal. This way, many less efficient mining operations were forced into submission, turning off their machines.
Bitcoin dump caused by the selling pressure
We can also depict that selling pressure technically. In the hourly Binance BTC/USD chart below, you can see that all the comparative buy/sell indicators reveal bearish dominance.
The buy/sell pressure indicator, along with its delta, shows a clear sellers’ dominance in the market. Sometimes, the pressure may contradict the actual number of buy and sell orders. However, during bigger price declines, there is also a much greater percentage of sell orders in the market as the horizontal blue line sits exactly at 50% mark.
Indeed, the fundamental market analysis may have been the cause of this sell-off, but there is no denying that the technical and fundamental aspect are correlated in this case. Without the bearish chart formation, miners would still be profitable and wouldn’t be selling their coins at such a low price. In the meantime, if miners weren’t selling their Bitcoin, there would be no FUD to motivate the sell-off of these proportions.
So, how is the formation so bearish?
The triangle and the wedge
Just like we already mentioned in our Bitcoin price analysis published on November 18th, there are two possible Bitcoin formations. The descending triangle and the falling wedge.
The descending triangle
If we would fall the descending triangle formation, Bitcoin looks really in trouble. The triangle’s support clearly held at $7,400. At 10 AM, this morning, it fell victim to the market’s bears and Bitcoin went straight down to $7,000.
Usually, this occurrence means that we will experience a prolonged bearish movement towards some lower support level. On the other hand, on the daily chart above, we can see that the last candle stopped exactly at $6,900. That level coincides with the .786 on the Fibonacci retracement.
Looking at the same daily chart, we realize that all major support and resistance tests took place at some of the Fibonacci levels. The .786 level used to act as a support in the past, therefore, it is still possible that it will be able to catch the free-falling Bitcoin.
.786 is also important if we look at Bitcoin inside another formation.
The falling wedge
The falling wedge formation is the bearish trend announcing the bullish reversal. The daily chart shows that, despite the major dumping spree, BTC is still inside the wedge. Moreover, it still has the space to bounce back towards the line marking lower highs. Most significantly, that point would overlap with the $6,900 historical support level. If that happens it isn’t hard to visualize Bitcoin going back towards $7,400 as the new lower high again.
In fact, that may even be more possible than the triangle scenario.
The two divergences of the Bitcoin dump
Some of the most convincing reversal signals are divergences. Divergences show the disproportion between a certain technical indicator and the price movement.
Our technical analysis of the Bitcoin BTC/USDT Binance hourly chart revealed two significant divergences.
The chart above bears witness to our claims. The green line following the RSI reading rises in the middle of the overselling period. The second divergence can be seen in the stochastic oscillator.
Nevertheless, if Bitcoin drops below $6,900, traders can forget about divergences and only focus on the next possible support level.
Until the time of the press, Bitcoin has fallen below $6,900 for a brief period. While that doesn’t have to be a crucial occurrence, if confirmed, we may yet see BTC droop towards the next crucial support test at $5,600. Nevertheless, the RSI divergence still persists during the new price decline.
By the looks of it, there is an approximate 80% chance that divergences may only be nothing more than anomalies produced by a number of buy orders trying to catch the bottom of the dip.
Until the charts confirm otherwise, we again declare Bitcoin to be long-term bearish. Congratulations to those shorting with leverage during the Bitcoin dump.
You should look elsewhere for investment advice since this isn’t it. Even if it looks like it, it’s not. Cryptocurrencies are known to be extremely volatile and risky speculations. Always do your own research. Consider consulting an investment professional prior to investing your money.