So this proved to be a pretty rough weekend for the crypto markets. From Friday to the low on Sunday BTC lost about $1000 or about 13% of its value and Ethereum and Litecoin didn't fare any better, with other cryptocurrencies losing 20% or more. During the middle of the sell-off, this weekend things seemed pretty bad but what happened really wasn't anything that unusual, yes, it was a fairly big sell-off but we have seen bigger sell-offs in the past.
In my opinion what makes this sell-off a little more critical is that it brought us right down to a very important support zone around the $6500 price level. This zone has been tested several times, the first time was on Feb. 5th when the price of BTC hit a low of $6651 before bouncing higher. The next day, however, that level was tested again and this time it failed, with the price of BTC dropping to a low of $6000 (Bitfinex price) which is the lowest price for BTC since the run-up to $20,000. The price of BTC was only near the $6000 level for a very short time (hours) before bouncing higher and within about two weeks had almost doubled to over $11,600. After BTC failed a couple of times to break through the $12,000 level the price slowly dropped over about a month back to the $6500 support zone, which was retested multiple times in early April but did not fail. The price of BTC bounced again over the next several weeks but this time failed to break through the $10,000 level creating a lower high and drifting lower over the last month to where it is today, once again testing this important support zone.
On Sunday I had published a chart on Tradingview in which I explain how to me it looked like BTC was forming a symmetrical triangle. However, after re-examining the chart today it now looks to me that BTC is forming a descending triangle, which I believe is an extremely bearish pattern. In my opinion, the descending triangle is the correct pattern with the $6500 support zone creating the bottom of the triangle.
So the reason I believe that this $6500 zone is so important is that if it fails we will most likely see the price of BTC drop and retest the Feb. low of $6000, which would be the first time this support zone has been tested since the Feb. 6th low. In my opinion, this $6000 price is a very important psychological price level, after all, it is the lowest price we have seen during this correction from $20,000 and was set months ago. I am concerned that if this important psychological level is tested and fails it could cause a capitulation sell-off, capitulation is the kind of panic selling that builds momentum, causing a dramatic drop in price and many times dropping them to a "bottom".
In my opinion, this also has huge implications for most of the rest of the crypto market, because as we have generally seen in the past most other cryptos tend to follow what happens to BTC.
So in my opinion, the $6500 support zone which is being tested at this very moment is all that stands in the way of a drop to what I believe is a very important psychological level. Personally, I would prefer that this important support zone around $6500 hold and we, not tempt fate. I am really not trying to over-dramatize the situation but just trying to present a possible scenario which I believe could play out soon. I should say that it is also very possible that even if we do retest the $6000 level, that it will not fail and the price of BTC will move higher once again from there. Who knows, maybe $6000 (Bitfinex) is the bottom and BTC will only move higher from here but as I said I would really prefer to not have to tempt fate.
Here is the BTCUSD chart.
Here is a link to my update on Ethereum.
https://www.tradingview.com/chart/ETHUSD/L0bc0HAn-ETCUSD-My-Bearish-Outlook/
Here is a link to my update on Litecoin.
https://www.tradingview.com/chart/LTCUSD/tyqmu3jJ-LTCUSD-Bearish-Descending-Triangle/
In closing, I want to say that I really am very bullish on cryptocurrencies long-term (years) but more bearish in the short-term (weeks to months).
I hope you enjoyed this article and welcome any comments, whether you agree or disagree.
So until the next article, Take care!
BigskyCrypto
Questions or comments? Email me at: info@bigskycrypto.com