Bitcoin (BTC) Warning: Bottom Still Forming – More Price Drops Ahead?

Bitcoin has arguably found a bottom at $80,000. However, after a $46,000 plummet from the all-time high, cementing that bottom might be difficult. Bitcoin traders need to move with caution - sharp falls as well as spikes to the upside may be in the cards.

If one assumes that the bottom is indeed in at just over $80,000, some might expect a v-shaped recovery. However, with liquidity still causing issues this is perhaps not the most likely scenario. That said, given the still very negative market sentiment, a short squeeze could come into play, forcing the price higher. All in all, this is still a dangerous phase for Bitcoin traders, and sharp price spikes in either direction could still be the norm.

A $BTC bear flag forming?

Source: TradingView

The 4-hour chart for $BTC reveals that the price is currently within an ascending channel - to all intents and purposes a bear flag. As far as the bulls are concerned, the sooner this is nullified as a potential pattern the better. However, these patterns do generally play out, and this one favours the price to exit through the bottom of the flag.

Just for the sake of avoiding a bullish bias, the measured move out of this flag could potentially take the price down to the low $60,000s, a scenario that would see the $BTC price in the utter depths of a bear market winter.

Nevertheless, all the main pockets of liquidity for the short sellers are up above $100,000, while below there are only crumbs. Market makers tend to rule the roost, therefore, an eventual surge to the upside may well be the preferred route.

A drop to $60,000?

Source: TradingView

Just to get an idea of what a measured move out of the current bear flag might look like, here it is in the daily chart. The move down to around $62,000 is only just above the major support at $60,000, and rather lower than the bear market level of $70,000. 

It’s certainly not an expected scenario, and there is the strongest horizontal level of all at $74,000 down to $69,000. Pushing back down through this level wouldn’t just confirm a bear market, it would probably nullify all Bitcoin price models to date.

Major trendline is key

Source: TradingView

The weekly chart for the $BTC price is still looking good - as long as the price does not fall through the major trendline and confirm below, the bull market is perfectly intact. Considering how low the RSI indicator is, and that the Stochastic RSI indicators are at the bottom - an eventual rise in price is more likely than not. 

Yes, there could still be some volatility at this bottom, but market makers are looking to shake out anyone who doesn’t have strong conviction. Short this market at your peril.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.