16 May 2022 12:36, UTC
Reading time: ~2 m
After a bearish breakdown of the long-term price structure, the BTC exchange rate managed to make a bounce from the $28,700 Fibonacci support area.
Bitcoin has been trading inside a long-term ascending parallel channel since April 2021. The last time BTC touched the resistance line of this channel was in November 2021. Then the price renewed the historical maximum at $69,000. Since then the rate of the coin was decreasing.
Since April 2021, the channel support line has undergone three tests (green icons). The last time it happened was in January. In early May, BTC finally made a bearish breakout from this channel and eventually reached a low of $26,700 on May 12. The low was formed directly above the support level of the Fibo 0.618 retracement.
A breakout of such a long-term pattern indicates a break in the price structure and may be a harbinger of the beginning of a large-scale price decline.
Also, the RSI index gives bearish signals after a bounce from the 50 line (red circle). Values below 50 are considered bearish and such a rebound could indicate a bearish reversal of the weekly trend.
If the decline continues, the next closest support will be located at $17,800 (Fibo level of 0.786 retracement).
Similarities to dynamics BTC in the past
Notably, the weekly RSI slipped below the 50 mark, with the market having already formed seven consecutive bearish candles on the weekly timeframe. Never before in the history of bitcoin has there been seven consecutive bearish candlesticks on this chart.
The RSI first dipped below 50 in August 2014 (red icon) – after a long period of the index being above that mark. After that, the decline continued for 154 days. The size of the drawdown during this period was 72%.
The second time this happened was in February 2018. This bearish breakout was followed by a decline that lasted 308 days. During that time, BTC fell in price by 60%.
In both cases, the market formed a price bottom when the RSI was in the oversold zone.
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