Bitcoin Price Analysis: Bear Run Shows No Decrease in Momentum

Over the weekend, BTC-USD market cap dropped from $45 billion to a current (and still falling) market cap of$39 billion. BTC-USD brought the entire crypto market to a screeching halt as traders continued to see devaluations in nearly every tradable coin on the market. So, let’s take a look at what has happened and see just how bad this dive will be for BTC-USD and the other cryptocurrencies.

On a macro scale, BTC-USD has been in the process of making a massive Head-and-Shoulders (H&S) pattern on the 6-hour candles:

Figure 1: BTC-USD, 6HR Candles, GDAX

Head and Shoulders are common, highly predictable market reversal patterns. They have well-defined criteria for price movement and price projections once the pattern breaks to the bottom. A H&S pattern is characterized by the following, illustrated above:

1. There is typically an ascending trend line;

2. A left shoulder that is smaller than a central peak (head) and a right shoulder that is smaller than the central peak;

3. The two shoulders are connected by the “Neck Line” of the Head and Shoulders.

4. There is first a test of the ascending trendline. A test and rejection of the ascending trend line’s support will bring us to the test of the neck line.

5. A test of the neck line is usually the ultimate deciding condition for whether or not the pattern will continue downward.

At the time of this article, BTC-USD has broken the ascending trend line and is in the process of testing the Neck Line of the H&S pattern. If condition #5 is broken, the price projections are calculated in the figure below:

Figure 2: BTC-USD, 6HR Candles, GDAX, Price Target for Head and Shoulders

Price targets are not guarantees of price movement. Rather, a price target should be used as more of a target “zone” rather than a discrete point in the price-space. In our case, BTC-USD happens to have a price target with a very reliable, major support line in the $1800s. Whether BTC-USD drops that far down remains to be seen. However, it is important to note the following in the figure below:</p><p><div class="media-placeholder"><div class="media-fill" style="width:610px; height:343px"></div><img alt="BTC Macro HS no volume.png" height="285" src="https://lh4.googleusercontent.com/uez-sgwUs-PuZKS4t1R7zMBUyxtlCtSnmCAClqEwNynigDfxPGGs-rXiy0ZxCcIN8IoaaA0Yxal32_AtQWYaR8zi800alN3onT1XAvcgN2dGbd18Kix1feU15VVlKCgTRMwCskR8" width="610" data-width="610" data-height="343" data-actual-width="1600" data-actual-height="900" class="media-image"></div></p><p><i>Figure 3: BTC-USD, 6HR Candles, GDAX, Steady Downward Momentum</i></p><ol><li><p> The momentum indicators, RSI and MACD, are showing no sign of downward momentum loss;</p></li><li><p>The steady downward momentum is coupled with very little relative buy-back volume.</p></li></ol><p>During previous bearish periods, there was a significant increase in buy volume. However, something we are not seeing in this current bear run is a volume increase. The market could reverse at any point (after all this <i>is</i> crypto!), but on all major long-term scales, the momentum indicators show no sign of slowing down. </p><p>If we break the Neck Line of the Head and Shoulders, below are the major support lines you can expect BTC-USD to rest on during its downward spiral:<br><br><div class="media-placeholder"><div class="media-fill" style="width:635px; height:357px"></div><img alt="BTC Macro HS Fib Lines.png" height="299" src="https://lh3.googleusercontent.com/UsWhqYkdegrVfZh_vWHI-00MDvYbl6JAxerhD10QZF-mk9D8rzASD44Ga3oHybFC52_JTfGgJJbqXCQ92ixXXKAHZAs4lVBrSD7VA0g3S2_ga8arGBoTEf434pg4HQabDqbDMAGG" width="635" data-width="635" data-height="357" data-actual-width="1600" data-actual-height="900" class="media-image"></div></p><p><i>Figure 4: BTC-USD, 6HR Candles, GDAX, Fibonacci Retracement Levels</i></p><p>At the time of this article, the market is testing the 38$1800s.