Over the past few days, Bitcoin has sustained a heavy drop. Despite a slight recovery to $6,850 as of the time of this article’s writing, the cryptocurrency remains a tad over 8% below the multi-week high of $7,470, established early last week.
It’s too early to say that Bitcoin is returning to the lows, a prominent trader says, who went as far as to say that the asset may actually be on the verge of retesting the highs as the technical outlook remains somewhat bullish.
Bitcoin’s Technical Outlook Still Strong
The recent weakness in the crypto market hasn’t stopped a popular trader known as “Flood” from expecting Bitcoin to rally higher.
Sharing his sentiment on April 12th, the trader said that as the cryptocurrency has held the six-hour supertrend, and it thus poised to bounce off this trend level and continue back to $7,400 in the coming four days. In reference to the chart below, he wrote:
“I hate planning out multileg trades but probably something like in the next few days. I’m bull biased here unless we dump below 6.5k. Then it would be pretty clear invalidation.”
Along with the fact that Flood is a well-known trader, known for taking large positions to bet on which way the market will swing, he earlier this month predicted the early-April rally from the mid-$6,000s to $7,500, accurately sharing at which point his followers should enter into longs.
A Correction Lower Seems Inevitable
Even if the recovery to the highs in the mid-$7,000s plays out, it appears that a correction is all but inevitable.
Mohit Sorout — a partner at crypto hedge fund Bitazu Capital — believes Bitcoin is in the midst of forming a “valid head and shoulders top” on its one-hour chart after the recent volatility, adding that the indicator is “one of the most reliable classical patterns.”
— Mohit Sorout 📈 (@singhsoro) April 13, 2020
Per previous reports from NewsBTC, the chart he shared indicates that the cryptocurrency is following the textbook chart pattern to a T, forming three consecutive tops in a shape that resembles the head and shoulders of a human while printing consecutively lower bout of volume. Bearish by textbook terms.
The S&P 500 and Dow Jones are also expected to roll over by certain analysts, like Scott Minerd of Guggenheim Investments, which could spell disaster for Bitcoin, an asset so tightly correlated with the stock market that many have jokingly called it an S&P 500 derivative.
Minerd wrote in an April 5th note published by Guggenheim, a global investment firm, that while he is looking to “nibble for value,” he expects the “other shoe to drop” in markets and potentially result in a strong correction of the S&P 500 to 1,500 points.
The consensus is, should this happen, Bitcoin will undoubtedly follow stocks lower, as in a global bear market where dollar liquidity is key, the correlation of all assets denominated in U.S. dollars should approach positive one.
Photo by Chris Henry on Unsplash