BTC/USD chart is showing a possible double top pattern, which, if it completes, could result in BTC dropping down to $7,000.
Bitcoin’s price chart shows a double top after failing to breach $12,000 for the second time. This bearish signal is a strong indicator of an imminent fall if it continues to break down past the $9300 support.
What is the Double Top trading pattern
A double top pattern is a strong indication of when an asset’s price trend is likely to reverse. It is typically characterised by (A) a strong bullish uptrend that fails to breach a resistance and falls down to a support level (B), after which it attempts to retest the previous resistance (C) and fails once again, heading back to the point where the first bullish uptrend started (D).
The emergence of this pattern represents a lack of momentum in Bitcoin where the coin’s supply is currently outweighing its demand.
Why is Bitcoin sliding?
Recent news surrounding a potential Binance hack appears to be the reason for igniting Bitcoin’s most recent decline, with widespread panic from the exchange’s users forcing BTC down -9.71% suddenly from $10,735 to $9692.
If the double top pattern plays out, we could see BTC fall back down as far as $7,000 especially if FUD continues to spread through the market like we all witnessed back in January this year. However we are yet to see Bitcoin dip below the point B support line at $9,300 which is needed to complete the pattern.
If we look at the MACD indicator, we can also see a bearish crossover appearing where the faster moving average has begun to converge with the slower moving average. This further shows a loss of momentum in the asset and is projected to fall below the zero axis (the horizontal line). Though the MACD is a somewhat lagging indicator, it can be used to confirm certain trends. In this case it shows that BTC is very likely to fall further than where it sits now.
At this moment in time, the sudden drop in Bitcoin’s price could just be a temporary panic sell in response to the Binance incident. However, it may do enough to complete the double top pattern and trigger a worrying sell-off as people rush to sell before the crash.
Either way, another dip below $7,000 could create a new rebound opportunity for BTC to return stronger and perhaps even break above the critical $12,000 level. For now, we have to wait and see.
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