The price of Bitcoin (BTC) has fallen since July 13. It accelerated its decrease on July 21, breaking down from an important horizontal area in the process.
While the price action and RSI readings are both bearish, the wave count suggests that the price could reach a bottom soon. However, a decisive bounce is required for this possibility to remain valid.
Bitcoin Price Falls After Deviation Above Resistance
The technical analysis from the daily time frame provides a bearish outlook. On July 13, the BTC price reached a new yearly high of $31,800 but quickly declined afterward. The subsequent day formed a bearish engulfing candlestick (red icon), which is characterized by a large bearish candlestick that completely engulfs the previous day’s bullish candle. This pattern often leads to downward movements.
After the bearish candlestick pattern, BTC hovered above the $30,000 horizontal area. However, it broke down from it decisively on July 23. This renders the entire previous breakout as a deviation, which is a bearish movement often followed by a sharp decrease.
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Despite the decrease, long-term holders are unfazed, holding nearly 74% of the total BTC supply. Moreover, BlackRock, the world’s largest asset manager, recommends a portfolio of 85% Bitcoin.
The daily Relative Strength Index (RSI) presents a decisively bearish reading. The RSI is a momentum indicator used by traders to assess market conditions and the sentiment surrounding an asset, indicating whether it’s overbought or oversold.
Typically, an RSI reading above 50, coupled with an upward trend, signals that buyers hold an advantage, while a reading below 50 suggests the opposite. Currently, the RSI is in a declining trend and below 50, both signs of a bearish trend.
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Additionally, with the decrease, the RSI confirmed a triple bearish divergence that has been developing since June 23 (represented by the green line). A bearish divergence occurs when the price rises while the momentum indicator decreases, indicating that the strength behind the upward movement is diminishing. This pattern often precedes a bearish trend reversal.
BTC Price Prediction: Wave Count Suggests Bottom is Close
Similarly to the daily time frame, the six-hour one suggests that the price is correcting. However, it indicates that the bottom is close.
According to the wave count, there has been a five-wave increase (white) since June 14 in the BTC price. If this wave count is accurate, it indicates that the price has undergone a correction, likely following an A-B-C pattern (black). The BTC price is currently trading just above the 0.382 Fib retracement support level (white).
Fibonacci retracement levels theory states that following a significant price change in one direction, the price is expected to partially return to a previous price level before continuing in the same direction.
So, the price has already reached a level where the correction can potentially come to an end.
Moreover, waves A:C has had an exactly 1:1.61 ratio. Due to this confluence of support levels, it is possible that the correction is already complete. If this is correct, the BTC price will reclaim the $30,000 level and possibly pump to $32,000.
If not, the next important support will be at $28,100, created by the 0.5 Fib retracement support level. After the correction is complete, a significant upward movement will be expected.
Despite this bullish BTC price prediction, a decisive close below the 0.618 Fib retracement support at $27,300 will indicate that the price has reached a local top instead. In that case, the BTC price could fall to $25,000.
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