Bitcoin price has retreated from its highs this year as traders made gains and trading-related risks persist.
Summary
- The Bitcoin price has formed a rising wedge pattern on the weekly chart.
- It has also formed a bearish divergence pattern.
- An average return could take the price below $60,000 in the short term.
Bitcoin (BTC) traded at $109,500 today, October 23, down from its year-to-date high of $126,200, wiping out billions of dollars in value. A closer look at the weekly chart shows that the coin has formed numerous bearish patterns that could push it to levels below $60,000.
Technical analysis of the Bitcoin price
The weekly timeframe chart shows that the BTC price has retreated and entered a correction after falling more than 10% from this year’s high.
A closer look shows that the price is forming a very bearish rising wedge pattern, which could lead to more downside implications. This pattern started to form in December when Bitcoin crossed the key resistance at $105,000.
The bottom marks the lowest swings since September last year. In most cases, a bearish breakout occurs when the two lines approach their confluence level, which is already happening.
The price target in a wedge pattern is estimated by measuring the widest part and then measuring the same distance from the breakout point. In this case the widest point is about 45%. Measuring the same distance from the breakout point yields a price target of $58,890.
Bitcoin’s price has other bearish catalysts. For example, the price remains much higher than the 200-week moving average of $64,786. This is a sign that there may be a mean reversion, a situation in which an asset falls back to its historical average.
Furthermore, the coin has formed a bearish divergence pattern as the Relative Strength Index, True Strength Index and the Percentage Price Oscillator have moved downward as the price has moved upward.
Therefore, a combination of mean reversion, rising wedge pattern and bearish divergence indicates a downturn. A move above the year-to-date high of $126,200 will invalidate the bearish forecast.
BTC Price Chart | Source: crypto.nieuws
The BTC price has seen similar declines before
A Bitcoin price crash to $58,000 would mark a 55% decline from its all-time high. While this is a big drop, the coin has seen similar and even bigger drops before.
Bitcoin, for example, fell 77% from its 2022 high to a low of $15,392. This crash occurred when FTX and Terra crashed and the Federal Reserve raised interest rates to their highest levels in decades.
Recently, the Bitcoin price fell 34% from a high in December to a low in April this year. Bitcoin also fell 55% from its April 2021 high to its low in June of that year.
All of these declines were good entry points as the coin always bounced back.
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