Bitcoin Sends Significant Bearish Signal Prepare for Potential Downside
Bitcoin is currently striving to recover from recent declines, yet caution is advised among investors, as technical indicators suggest potential risks ahead. According to a recent analysis by investment research platform Game of Trades, published on July 2nd, Bitcoin has reentered its upward channel around the $62,000 mark after spending four months trading above it. This shift, as highlighted by the platform, raises concerns about increased downside risks for Bitcoin moving forward.
Game of Trades noted that Bitcoin has undergone two consecutive 20% corrections since March, contrasting sharply with its behavior in 2023 and early 2024. This change in momentum, the analysts warned, may signify the formation of a significant topping pattern, potentially indicating further declines.
Discussing the market dynamics, Game of Trades pointed out a notable divergence between Bitcoin and the S&P 500. While Bitcoin showed signs of recovery in May, initially boosted by upward trends in key moving averages and the S&P 500’s record highs, it failed to sustain momentum above resistance levels. This divergence, according to the platform, is a cause for concern, suggesting possible short-term downside risks. They acknowledged the possibility of a bear trap or a false breakdown scenario but emphasized the unusual nature of Bitcoin’s divergence from the broader market.
Historically, Game of Trades highlighted instances in January 2024 and January 2023 when such significant divergences between Bitcoin and the stock market occurred, noting that Bitcoin eventually aligned with the S&P 500. However, in November 2021, it was the S&P 500 that adjusted to align with Bitcoin’s movement.
In addition to technical indicators, the analysis pointed to large Bitcoin holders selling off assets over recent months, a reversal from their behavior at the end of 2022. Currently, Bitcoin is trading in a sideways pattern with uncertain direction. There’s a possibility that Bitcoin may test the lower bounds of its price channel before potentially syncing up with movements in the S&P 500, which would be a classic bear trap scenario.
Regarding price analysis, Bitcoin struggled to sustain prices above $63,000 and is now aiming to hold above the $62,000 support level. At the time of reporting, Bitcoin was valued at $62,323, experiencing slight daily losses of over 0.6% while showing a modest weekly gain of 1%.
Looking ahead, the bullish trend remains intact as long as Bitcoin stays within its upward channel. A break below the lower trendline could signal a potential trend reversal or a deeper correction, whereas a strong move above the upper trendline could indicate continued bullish momentum.
Disclaimer: This content does not constitute investment advice. Investing in cryptocurrencies involves risks, and investors should consider their investments carefully.
