Bitcoin is back at the $40,000 level and it has a hard time bouncing. As the cryptocurrency with the largest market capitalization, Bitcoin’s price action influences the entire crypto market.
In other words, should Bitcoin’s decline accelerates, it is hard to imagine other cryptocurrencies such as Ethereum or other stablecoins rallying. So what does the technical analysis picture say about Bitcoin?
Massive head and shoulders patterns paint a bleak picture for Bitcoin
The technical analysis picture reveals multiple head and shoulders patterns that suggest further weakness may lie ahead.
From left to right, the first head and shoulders pattern peaked at $65,000 but it was invalidated by a new all-time high that Bitcoin made in 2022. As such, the focus shifted to a new head and shoulders that formed in the meantime.
Traders may interpret the current head and shoulders in two ways. One, shown above in brown, is a head and shoulders pattern whose neckline was already broken.
Moreover, the market has retested the neckline twice, and both times it was rejected. In this scenario, the measured move points to further downside towards $20,000.
Another scenario, shown in blue, implies that the neckline of a bigger head and shoulders pattern is not broken. A move below $35,000 would put further pressure on the market, and the measured move in this scenario points to $5,000.
The US dollar’s strength does not help the bullish case for Bitcoin either. The Federal Reserve may decide to hike the funds rate by 50bp in May, as suggested by several members, thus fueling more strength for the greenback. If that is the case, it may be just the catalyst that bears need to push the price below $35,000.
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