Bitcoin price continues to decline but has moved mostly sideways, leaving the bears unable to break support to new lows. With the trading range at a crucial point, as a trading legend often says, it is “time to be careful”.
The reason for the focus is because what started as a fractal in the price action is now causing similar behavior in the Bollinger Bands that resulted in one of the strongest pumps in Bitcoin history. Is this what’s next in the bearish sentiment at such critical heights right now?
Break in downtrend leads to confusion among traders, market in fear
The markets are cyclical and sentiment often lags behind price developments. The recent uptrend in cryptocurrencies paused when things were at their best – just as Coinbase Global went public and prices were at all-time highs.
Related reading | Market timing: why Bitcoin could break lows before jumping
It wasn’t until more than 50% of the price per BTC was thrown off that investors began to get pessimistic on Bitcoin. A symmetrical triangle has formed in the last few weeks since the big drop in May, but it may not develop as textbook technical analysis suggests.
The Bollinger Bands are very similar to the “China Pump” from 2019 | Source: BTCUSD on TradingView.com
Sentiment is extremely fearful and a technical indicator that can be used to predict rebound, the Bollinger Bands, looks a lot like the last time the market took a break in a new downtrend like this one.
Back then, the tool’s creator, John Bollinger, warned that it was now “time to be careful,” as tricks may soon reveal, and revealed this.
Bitcoin “squeeze” could lead to an epic pump
With the worst sentiment and a series of lows now being crossed off the list, Bitcoin price could pump higher again to either retest or regain previous highs.
Price action has repeatedly pushed into the lower Bollinger Band without major disruption, suggesting that this latest test of the lower band is a bear trap setup called the “Gimmee Bar” discovered by Joe Ross.
Several wicks in the lower BB indicate a bear trap | Source: BTCUSD on TradingView.com
In 2019, the top cryptocurrency failed to restore lost levels, but the bull market is very different this time around. Holding this level here would result in the first major bull correction and the rally continues from here.
Related reading | Bitcoin bulls and bears alike watch out for potential pump-and-dump fractals
If levels cannot be restored, similar to the way the China pump failed in late 2019 and led to new lows, an unfinished recovery from here will too. Regardless of what happens, it’s worth paying extra attention over the next few days until Bitcoin price takes a new direction.
Featured image from iStockPhoto, charts from TradingView.com