The Bitcoin price began November 22 with a rapid decrease, reaching lows of around $7000. It is currently inside a very significant support area — a breakdown below which could trigger an even more rapid price decrease.
Well-known financial commentator and CEO of Euro Pacific Capital Peter Schiff stated that the Bitcoin price has created a head and shoulders pattern and is currently at the neckline. A breakdown from this pattern would take it to $1000.
#Bitcoin is nearing the neckline of the head-and-shoulders top I pointed out before the Oct 25th 40% pump. The right shoulder is now shrugged and the neckline slanted and parallel to the shoulders. If it breaks the price objective for the dump is $1,000 to complete the pattern.
— Peter Schiff (@PeterSchiff) November 21, 2019
Schiff is a notable Bitcoin bear. However, his predictions have been wrong several times before — as noted in the graph below:
— Crypto₿ull (@CryptoBull) November 21, 2019
More specifically, he suggested that precious metals will perform better than Bitcoin in 2013 and he stated that Bitcoin below $3800 is not a bargain in January 2019 — a few months before the price began its current upward move.
However, let’s proceed with analyzing this possible pattern closely and see if $1000 can indeed be reached.
Bitcoin’s Head and Shoulders
The head-and-shoulders pattern is considered a bearish pattern. The current formation, however, is unusual — since the lead up to both the head and the right shoulder is almost vertical. Additionally, the height of the right and left shoulders differ significantly from each other.
A breakdown of the entire height of the pattern would take us to $1000, giving us the target outlined in the tweet.
At first glance, this seems unlikely. Even though the height gives this target, a pattern needs to have something to reverse. Since the lead up to the pattern began from $3000, it would be very unusual for the price to retrace below the beginning of the entire upward move.
When looking at the long-term Bitcoin chart, this target coincides with the highs reached in 2014.
However, such a breakdown would take the Bitcoin price below the support line that has been in place since 2011. Additionally, it would take it below the 200-week moving average (MA). The price has never traded below this MA.
To conclude, we believe it is unlikely that the Bitcoin price will decrease to $1000. Furthermore, if it does so as a result of the head and shoulders, it would take roughly three months for it to get there — roughly the time it took for the pattern to develop. We believe that is even more unlikely.
If the price had created a head and shoulders lasting several years, with the entire current move being the right shoulder, the target would be more likely to be reached. However, this is not the case.
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.
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Images courtesy of Shutterstock, Trading View and Twitter.