Bitcoin Cautions About Another Bearish Correction as Price Forms H&S Pattern

Image by creisi from Pixabay

Goris (CoinChapter.com) — Bitcoin corrected upward in the early trading session on Tuesday, reiterating confidence about its long-term bullish bias against the prospects of higher inflation.

The BTC/USD exchange rate reversed its downside course after hitting $42,126 on Coinbase. In retrospect, traders were earlier dumping their positions in response to Elon Musk’s announcement that his company Tesla will no longer accept payments in bitcoin. The billionaire investors further intensified the selling pressure by saying that Tesla would also dump its $1.5 billion worth of BTC stash.

Nevertheless, he later clarified that the electric vehicle firm has no plans to sell its crypto holdings.

The drama prompted shaky hands to sell off their bitcoin. Between last Wednesday’s open and Monday’s close, the BTC/USD exchange rate was down more than 25 percent. On the other hand, the rebound move on Tuesday risked forming a bearish technical pattern.

Head & Shoulders

Dubbed as Head and Shoulders, the technical structure appears when an asset form three peaks over a baseline, with the middle one higher than the other two. The price eventually breaks below the base support and crashes by a distance equal to the pattern’s maximum height.

Bitcoin prints head and shoulders pattern. Source: BTCUSD on TradingView.com

Bitcoin checks all the boxes of a head and shoulder pattern. Moreover, the cryptocurrency appears to have been in the process of confirming its breakdown move. Its downside target sits near $34,750, just within the range of another psychological support around the 200-day simple moving average.

Conversely, a pullback from the current support line near $42,977 expects to sent BTC/USD back towards the resistance confluence of 50-DMA and 20-DMA waves (the blue and the green one in the chart above, respectively). That would also invalidate the entire H&S structure, raising possibilities that bitcoin test its previous all-time high near $65,000.

Bitcoin Is Here To Stay

Fundamentals support the benchmark cryptocurrency. Statements issued by hugely-followed Bitcoin advocates now present Elon Musk as a troller that should become the basis of a crypto investor’s strategy.

“Bitcoin was never about Elon Musk,” said Anthony Pompliano, an early-stage investor. “It won’t be about Elon Musk moving forward either.

“If you can’t hold the dollar, what else can you hold? Real estate? Stocks? Bonds? Commodities? They are all underperforming bitcoin,” he added. “Bitcoin remains the apex predator of financial markets. It is continuing to gain adoption, which can be seen by wallet addresses, trading volumes, on-chain transactions, hash rate, and registered users at various platforms. Bitcoin is winning. It is winning despite the billionaires and Wall Street bankers.”