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Crypto market sentiment is the most bullish its been this year thus far, and the most bullish for Bitcoin since the historic October 2019 rally that set the record for the asset’s third-largest single-day gain.
However, while bulls are celebrating early that the downtrend is over, a fractal from 2018 could suggest that there’s going to be another six months of crypto winter and that the worst of the current downtrend is yet to come.
Frightening Bitcoin Fractal Is Crypto Investors’ Worst Fears
Starting in December, Bitcoin price repeatedly tested lows around $6,500, forming an inverse head and shoulders pattern that has since confirmed and driven Bitcoin to as high as $8,450 last night before a slight retracement began.
Related Reading | Bitcoin Price RSI Breakout Could Target $9K Short-Term
The first-ever cryptocurrency continues to trade above $8,000, currently around $8,300. The leading crypto asset by market cap holding above $8,000 is considered extremely bullish, and it’s convinced the crypto community that the current downtrend has finally come to an end.
The Relative Strength Index is showing a clear breakout of a downtrend, however, at the same time the indicator is signaling that Bitcoin is far more overbought now than it was during the October, China news-driven pump.
However, the current price action appears to be eerily familiar and nearly matches up perfectly with a fractal dating back to July 2018. And if the fractal is legitimate and plays out, not only is Bitcoin’s current downtrend not over as many believe, but the worst is still yet to come.
Back in July 2018, Bitcoin touched a low of $5,800 forming the head on a massive, inverse head and shoulders pattern. Once the pattern confirmed, the crypto asset rocketed to $8,450 where the rally came to a halt – the same price level where last night’s rally stopped.
The resulting peak made a lower high in price, but a higher high on the RSI, forming a bearish divergence. The same exact divergence has also appeared on the RSI on current daily timeframes as well, suggesting that the rally could be over, and another drop is ahead.
The fractal would also hint at six more months of downtrend, and a retest of 2018 bear market lows near $4,200, where the breakout initially occurred back in April 2019.
Related Reading | Bitcoin Rally More Overbought Than October Pump Above $10K, Data Shows
While there’s no denying the price action and indicator signals are eerily similar, there are a number of unique factors that could suggest that this time is different. A brewing war between the US and Iran could cause investors to flight to Bitcoin as a safe haven asset, and with two full years of downtrend now behind us, selling is likely far more exhausted than it was back in July 2018, just six short months after the crypto bubble popped.
Charts via TradingView
