Bitcoin (BTC) rallied over the past 5 days, rising as high as $7,600 and reaching a bull flag top at $66,500. However, the price rally stalled before setting a new local high, and momentum indicators suggest a possible topping out. Will $BTC price reverse now? How far will it fall?
Bitcoin’s outlook remains positive
The outlook for Bitcoin remains positive. China has announced that it will adopt more easing policies, which will also bring more liquidity to the entire global monetary system, and other central banks will undoubtedly follow suit.
U.S. spot bitcoin ETFs took in 88,500 bitcoins on Monday, or about $555.9 million in U.S. dollars. This was the largest single-day net inflow since early June and nearly 20 times the daily issuance of newly mined bitcoins.
Larry Fink, CEO of Blackrock, the largest Bitcoin holder among U.S. ETFs, recently said Bitcoin is an asset class in its own right and predicted that the alpha cryptocurrency will become “as big as the U.S. housing market” regardless of who wins the presidential election.
$BTC faces rejection
Nonetheless, from a technical analysis perspective, Bitcoin is at a very critical juncture that could have short- and medium-term implications. If the current rally is rejected again by the bull flag top trendline, there is a chance of another downside move, and how far would that take the price?
The 4-hour chart for $BTC shows a breakout of the descending trendline on Monday. The price quickly rose from the breakout, gaining 5.3% before stalling at the upper trendline of the bull flag (bold descending line).
In addition to the rejection, the price also failed to make a new local high, which, if sustained, could make the rejection more pronounced. In terms of potential downside risk, the Fibonacci levels for this move point to $63,600 at 0.382, $61,800 at 0.618, and $60,500 at 0.786. There is also a chance that the price could pull back to retest and confirm a breakout of the trendline.
Prices about to fall?
On a more positive note, it can be seen that $BTC price appears to be making another attempt back towards the top of the flag. The bulls may succeed and the price is able to make a local higher high or even break above the top of the bull flag, but the Stochastic RSI momentum indicator is showing a top on all short-term timeframes. It is for this reason that a price drop is more likely in the coming hours.
$BTC faces huge resistance
Looking at the weekly chart, horizontal resistance is currently around $65,700, coinciding with the top of the bull flag. Short-term momentum is almost exhausted, which does provide support for the bears.
At the bottom of the chart, the weekly Stochastic RSI is still showing a crossover down. If rejection occurs now, this crossover down could become more pronounced and a third false breakout of the indicator could be imminent.
