The price of Bitcoin dropped to as low as $8,892 on June 15 following a spike in selling pressure on U.S. crypto exchanges. Historical data suggests the abrupt decline of BTC at a crucial price point could catalyze a multi-month correction.
Since October 2019, $10,500 has acted as a key resistance level for Bitcoin.
Every attempt of Bitcoin to surge past $10,500 in the last nine months was met with a strong rejection followed by a steep downtrend.
In October 2019, Bitcoin’s failed attempt at a breakout led to a 63-day correction as price fell to $6,400. In February 2020, BTC dropped to $3,600 within a 30-day period.
Now, after the 3rd failed retest of $10,500, Bitcoin at risk of seeing a triple formation—a highly bearish pattern in technical analysis.
In an interview, Michael van de Poppe, full-time trader at Amsterdam Stock Exchange, emphasized that the uptrend of Bitcoin is intact until it drops below $8,600.
If BTC declines to the mid-$8,000 region, the trader said it could potentially lead to a downtrend to the range of mid-$6,000s to $7,600.
“My viewpoint on the market is that we’re on a crucial pivot… Why a crucial pivot? If $8,600 is lost, the uptrend is lost and potentially many stop/loss triggers can cascade a further downwards drop. In that regard, I assume the levels around $7,300-$7,600 are likely to be tested and potentially even the 200-week MA around mid $6ks for a required test.”
But, the bearish scenario for Bitcoin is dependent on whether BTC can protect the $8,600 support level.
In the near-term, Bitcoin either has to regain momentum above $9,000 and avoid a correction or fall below $8,600 and risk a several-month-long bear cycle.
Van de Poppe said:
“In general, as long as the price remains above the previous low at $8,600, the upwards trend is still intact. This upwards trend started since the heavy crash of March 12th. Through that, a potential wick to $8,800-8,900 can still occur, but price of Bitcoin needs to reclaim $9,300 relatively fast in order to sustain that upwards momentum. “
One variable that may continue to affect the price of Bitcoin is its ostensible correlation with the U.S. stock market.
Since early April, the price trend of Bitcoin has closely resembled the S&P 500, indicating that various geopolitical risks in the global economy are pressuring investors to approach risk-on assets with caution.
Holger Zschaepitz, market analyst at Welt, said:
“Global markets start in risk-off mode to week as 2nd-wave fears grow. U.S. and European futures retreated along with Asia shares. More than 20 US states seeing pick-up in cases, Tokyo reported jump and Beijing fresh breakout. Bonds gain with U.S. 10-year 0.66%. Brent Oil drop to 37.58, Gold $1,727, Bitcoin $9.1k.”
While Bitcoin itself is considered as an uncorrelated asset, there are aspects of the Bitcoin market that lead the price of BTC to be impacted by geopolitical risks to some extent.
For instance, the largest stablecoin in the crypto market is Tether (USDT) and it accounts for a large portion of daily Bitcoin volume.
Chinese investors typically buy Bitcoin through Tether to circumvent strict restrictions. On-chain data showed that the majority of Tether volume came from China in 2019.
The ongoing slump in the global economy and rising tensions between key governments could also amplify uncertainty in the cryptocurrency market in the short-term.