Bitcoin price rose for three consecutive days as traders waited for the upcoming FOMC decision. BTC was trading at $93,500, up sharply from last month’s low of $80,635. Still, the coin has formed some alarming patterns that point to a harsh reversal after the Federal Reserve interest rate decision.
Bitcoin Price Has Formed Risky Chart Patterns
The daily chart reveals that the BTC price has crawled back in the past few days as investors bought the dip. It also jumped as investors anticipated the Fed to cut interest rates by 0.25%. It will be the third rate cut of the year.
However, a closer look at this chart shows that the coin could be at risk of a dive, potentially to the support at $80,637. The ongoing rebound is made up of two ascending and converging trendlines. These lines are about to meet, which is when bearish breakouts normally happen.
The wedge is part of the bearish pattern, a common continuation sign. This pattern has a vertical line and a symmetrical triangle pattern.
All these patterns formed a few weeks after the coin formed a death cross pattern. This pattern is made up of a 50-day and 200-day moving averages crossover. It is one of the most common risky patterns in technical analysis.
Also, the patterns formed after it made a double-top pattern with a neckline at $107,420. A combination of a double-top and a death cross pattern often leads to more downside.
Bitcoin Price ChartTherefore, these patterns mean that the value of BTC will have a bearish breakout. If this happens, the next key target level to watch will be at $80,637, its lowest point in November this year. Such a move would mean a 13% drop from the current level.
On the other hand, a rebound above the 50-day moving average at $97,000 will invalidate the bearish Bitcoin price forecast and point to more gains.
Why BTC Price May Crash After the FOMC Decision
In theory, Bitcoin, altcoins, and other risky assets tend to do well when the Federal Reserve is cutting interest rates. However, in some instances, these assets tend to drop when the bank is cutting. This explains why the Bitcoin price has dropped since the Fed slashed rates in September this year.
One reason why it may drop is that the coin has rebounded in the past few days as investors anticipated the cut. As a result, there is a likelihood that investors will sell the news since market participants already expect that bank to cut rates. This is known as buying the rumors, and selling the news.
Odds of Fed Cut are risingThe other main reason why Bitcoin price may crash after that cut is that the Fed may have a hawkish tilt, where it slashes rates and hints that it will hold them steady for longer.
Finally, the rate cut could trigger inflation in the United States, which will push the bank to be more hawkish in the next few months, even if Donald Trump appoints a puppet to the Fed.
Source: https://coingape.com/markets/bitcoin-price-alarming-patterns-point-to-a-dive-to-80k-after-fomc-decision/
