Bitcoin, the most valuable cryptocurrency, is currently facing a critical juncture as indicated by the candlestick formation in the weekly chart. Notably, renowned analyst Tony Spilotro sounded the alarm after identifying a bearish head-and-shoulder pattern in the chart. While the pattern is in its final phase of formation, its realization could have dire consequences for Bitcoin bulls, potentially pushing prices below a critical support line towards $18,000 or even lower in the coming weeks. Traders are advised to exercise caution and adopt a wait-and-see approach until a clear trend emerges.
As of August 15, Bitcoin remains stable and is currently within a broader uptrend based on a top-down analysis. The cryptocurrency is currently confined within a trading range established between June and July 2023, as observed in the daily chart. Despite the general optimism surrounding a potential price recovery above the highs of July 2023, Bitcoin has been moving sideways, holding above the $28,000 support level but below the $31,800 mark reached in the final days of H1 2023. A breakout above $32,000 with increasing trading volumes could potentially spark demand and pave the way for price gains towards $35,000 or higher.
While the inability of sellers to drive Bitcoin prices lower may be perceived as bullish from a buyer’s standpoint, the potential formation of a head and shoulder pattern in the weekly chart casts doubts on the bullish prospects. Traders remain cautiously optimistic as the candlestick arrangement, particularly in the weekly timeframe, suggests a vulnerability that could impact market sentiment and hopes for sustained growth. It is crucial to closely monitor the unfolding market dynamics before making any significant trading decisions.
Several fundamental factors further complicate the outlook for Bitcoin’s price in the coming days. Inflation is relatively high in the United States compared to the benchmark rate of 2%, which may prompt the Federal Reserve to resume interest rate hikes in the third and fourth quarters of the year. Despite relatively stable labor conditions and somewhat subdued inflation, the recent rate hikes by the Federal Reserve, currently ranging between 5.25% and 5.50%, highlight the central bank’s commitment to curbing inflation and maintaining economic stability.
It is important to note that the Federal Reserve’s tightening policy has had an impact on the crypto market in the past. In 2022, Bitcoin experienced a significant drop, falling from its peak in 2021 to below $16,000 by the end of the year. While Bitcoin has the potential to serve as a store of value, similar to gold, during times of crisis, analysts still view it as a “risky” asset. Traders and investors must consider the potential implications of the Federal Reserve’s actions on the cryptocurrency market.
From a bullish perspective, Bitcoin is scheduled to undergo a halving of its miner rewards in 2024. This reduction in supply may cause a supply shock, making Bitcoin scarcer and potentially supporting prices in the second half of next year. This event could play a significant role in shaping the future trajectory of Bitcoin’s price.
Bitcoin finds itself at a critical juncture with the emergence of a bearish head-and-shoulder pattern in the weekly chart. While the cryptocurrency remains stable within an uptrend, traders should be cautious due to the potential impact of the pattern’s realization. Furthermore, fundamental factors such as inflation and the Federal Reserve’s tightening policy pose additional challenges to Bitcoin’s outlook. However, the upcoming halving of miner rewards may provide a catalyst for price support in the future. As always, it is crucial for traders to stay informed, closely monitor market developments, and adapt their strategies accordingly.
**Feature image from Canva, chart from TradingView**
