After Forming a Rising Wedge Pattern, Bitcoin May Take a Bearish Turn

On Sunday, February 14, Bitcoin brought roses for its holders as it hit a new all-time high around $49,000. The coin failed to shoot past $50,000 despite the rising bull outlook in the market. The king cryptocurrency has shown to analysts a “rising wedge” pattern that has alerted chartists and analysts of a potential bearish reversal.

At 2:42 GMT on Monday, the benchmark cryptocurrency traded at $47,642, losing 2.54% in the last 24 hours.

Last week, digital currencies enjoyed a profitable market. For Bitcoin, the exchange rate inched higher leaving behind a trend of higher highs and higher lows. Its move formed two upward sloping trendlines that converge towards a single point called “apex.” Technically, the structure constituted a Rising Wedge formation, which typically leads to a price breakdown.

rising wedge pattern from tradingview

Bitcoin rising wedge pattern put the length of the distance between the structure’s upper and lower trendline at almost $5,500. That puts the wedge bar target roughly beer $43,000 in the coming sessions.

Bulls are still in control

From recent sessions, it appears that Bitcoin bulls still have firm grip over the price action of the king cryptocurrency. If Bitcoin breaks below the wedge’s lower trendline it may prompt the coin to receive support from another upward sloping trendline that constitutes an Ascending Channel pattern.

Bullish tailwinds come from Bitcoin’s Relative Strength indicator. This has remained absent of overbought conditions, despite the coin trading at near the levels. As a result, the pioneer cryptocurrency could expect a slight rebound towards $50,000, with $48,000 to $48,200 acting as an interim hurdle to break.

On-chain data shows that the short-term bullish outlook may remain. CryptoQuant data shows stablecoins reserves across all the exchanges are at their record high. This is an indication that traders could use the dollar-pegged tokens to purchase cryptocurrencies, including bitcoin.

Ki-Young Ju, the CEO of CryptoQuant wrote:

If you’re a long-term investor, now is the time to buy BTC. Not sure how many corrections would be along the way, but the on-chain indicator says there are enough stablecoins in exchanges compared to Bitcoins to get another leg up.

stablecoins reserve across exchanges

Emerging risks for Bitcoin

Bitcoin traders and investors may expect to face a wave of risks from the US economy’s potential to undergo a quick recovery. The Bank of America report noted that the Federal Reserve is looking to reduce its dovish outlook. The dollar could post growth in 2021. Many strategists believe that this policy normalization could begin to appear in 2022.

On the other hand, the European Central Bank will likely boost its easing programs. This is expected to weaken the euro. While the euro weakens, the dollar is expected to gain.

If the greenback experiences a good growth, positive sentiment toward Bitcoin may reduce as people begin to turn back to the dollar.

© IbrahimAnifowoshe for Commodity Blog, 2021. | Permalink | No comment |
Published under: Bitcoin, Technical Analysis

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