Shaurya Malwa · 4 hours ago · 2 min read · Insights via Michael Moro
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
Forty-year trading veteran Peter Brandt made the headlines earlier this month when he stated that a violation of the “parabolic phase” that started in December 2018 could ignite an 80 percent correction of the entire parabolic advance.
If current parabolic phase is violated, we could expect either an 80% correction of 7-month advance or much smaller correction w/ definition of new parabola w/ shallower slope. $BTC Note formation of possible 2-wk H&S or H&S failure pic.twitter.com/6IF1bHREAv
— Peter Brandt (@PeterLBrandt) July 7, 2019
As Bitcoin continues correcting and now is trading below the $10,000 support level, Brandt reaffirmed that the cryptocurrency market could be about to suffer a major plunge from the high of $310 billion in market capitalization to roughly $150 billion, which will mostly affect altcoins.
While the parabola in BTC was subject to different renderings, the parabola in the total market cap chart was loud and clear. Total cap should correct 80%. Most of the damage of decline will occur to altcoins. pic.twitter.com/DssCIL4H0R
— Peter Brandt (@PeterLBrandt) July 16, 2019
An 80 percent correction from Bitcoin’s latest parabolic advance from $3,130 to $13,800 could imply that this cryptocurrency will depreciate to nearly $5,000, which is somewhat more optimistic than Tone Vays’ idea of a move down to $2,800. Although it is too early to tell whether any of these bearish scenarios will be possible or not, this technical analysis will evaluate the different levels of support that could hold BTC from a further drop.
Bitcoin Technical Analysis
According to Josh Rager, a technical analyst, an 80 percent correction will be devastating to most crypto assets, but the $8,000 support level could be able to contain the price of Bitcoin from such as severe decline.
This 80% correction that Peter speaks about is the measured move of 300%+ of the parabola
Would not be an 80% correction from 0 to top
This will certainly be a blow to most assets and BTC has strong support in the block shown below near $8000 pic.twitter.com/YwOaMAHQh8
— Josh Rager 📈 (@Josh_Rager) July 16, 2019
As a matter of fact, when looking at the Fibonacci retracement indicator on the 3-day chart it seems like Rager could be pointing out that the 50 to 61.8 percent Fibonacci retracement zone could act as a strong barrier of support due to the high concentration of demand around this area.
Now that Bitcoin appears to have broken below the major support cluster given by the 38.2 percent Fibonacci retracement level and the support trendline that formed since late March, which could have been triggered by a 375 BTC sell order in Bitstamp as Josh Olszewicz explained, it could indeed be heading down to the he 50 percent Fibonacci retracement level.
In addition, the moving average convergence divergence (MACD), which is commonly used to follow the path of a trend and calculate its momentum, had a bearish crossover between the 12-three-day exponential moving average and the 26-three-day exponential moving average on the 3-day chart adding credibility to the major correction overseen by Peter Brandt.
The last time BTC experienced a bearish MACD crossover on the 3-day chart was on Nov. 9, 2018, which saw its market valuation depreciate more than 50 percent from $6,420 to $3,130.
Adding to the bearishness, Bitcoin seems to be moving outside of the ascending parallel channel that has been developing since mid-December 2018. Due to the longevity of this channel, a candlestick close and an open below it could accelerate the selling pressure behind BTC significantly dropping its price down to at least the 50 and 61.8 percent Fibonacci retracement zone previously described.
Nonetheless, as the technical analyst Bob Loukas stated, there is still a chance that instead of retracing abruptly Bitcoin will go through a consolidation phase in the next 4 months that could eventually take it to around $8,000 and this level of support could act as a rebound point to take this cryptocurrency up to new highs.
#bitcoin's intermediate term trend is almost certainly over now. A corrective phase appears to be well under-way, selling heavy, but at some point re-accumulation to hold the line. I would not be surprised to see a 4 month (2-Cycle) consolidation from here. pic.twitter.com/3k9XIuJLrc
— Bob Loukas (@BobLoukas) July 16, 2019
To Luke Martin, this corrective phase could indeed be a trading range between $13,000 and $9,700 where Bitcoin could spend the near future trading before a break above or below these levels that could pinpoint where it is heading next.
For most investors the most important info that a $BTC chart conveys is structure:
Bitcoin was ranging until Apr 1st. The uptrend lasted ~3 months. Price has been ranging for ~2 weeks.
Below 9700 or above 13k could break price out of current range. pic.twitter.com/KEWCEHMboZ
— Luke Martin (@VentureCoinist) July 16, 2019
Under this idea, the 12-hour chart shows a parallel channel that started in mid-June, which could contain the price of Bitcoin before a clear break occurs. So, if the current 12-hour candlestick is able to close above the 100-twelve-hour moving average a lot of credibility could be added to this scenario and a rebound to $11,100 or the 50-twelve-hour moving average could be expected.
It remains to be seen whether the 100-twelve-hour moving average is able to hold because a confirmed break below it will take Bitcoin down to the 150 or the 200-twelve-hour moving average, which is sitting at $9,200 and $8,000 respectively.
It is worth noting that a move down to $8,000 will only represent a 40 percent retracement from the high of $13,800, which is normal during a Bitcoin’s bull market and helps maintain bull trend healthy.
The most recent bull market that BTC had, for instance, lasted more than two years and represented 10,000 percent gains from the low of Aug. 25, 2015, when Bitcoin was trading at $198, to the high of $19,760 on Dec. 17, 2018. During this time span, there were eight significant corrections.
The high of $501 on Nov. 3, 2015, was followed by a 40.39 percent pullback, while the high of $784 on June 17, 2016, experienced a 38.37 percent retrace. After an all-time high was achieved on Jan. 4, 2017, when Bitcoin was valued at $1,180 it dropped 36.50 percent. Two months after the milestone, BTC hit a new all-time high of $1,320 on Mar. 8, to then fall 32.57 percent.
Since that time BTC began reaching higher highs every couple of months. On May 25, the cryptocurrency went up to $2,746 and immediately pulled back 31.38 percent. The high of June 12 when one BTC was worth $2,985 was followed by a 39.20 percent correction. A similar pattern happened after the high of Sept. 1 and Nov. 6 that saw Bitcoin drop 40.12 and 30.09 percent, respectively.
The overall sentiment in the market is bearish due to the number of sell signals that have been triggered under different time frames, such as the bearish MACD crossover on the 3-day chart and the break of the ascending parallel channel on the 1-day chart.
Despite Peter Brandt’s bold prediction of an 80 percent correction that could take Bitcoin sub $3,000 levels, it seems that at the moment this cryptocurrency could likely retrace to around $8,000, which will represent a 40 percent pullback that based on historic data will help keep the bullish trend healthy.
There is a small probability that Bitcoin could actually go through a consolidation phase between $13,000 and $9,700, but it will all depend on its strength to get back above the 100-twelve-hour moving average before the current 12-hour candlestick closes.