Bitcoin price remained under pressure this week as investors remained in the sidelines as global risks rose. BTC dropped to $108,600, down by 14% from its highest point this year. This article explores some of the top reasons why the BTC price may drop further in the near term.
Bitcoin price is about to form a death cross
The daily timeframe chart shows that the coin has been in a strong bearish downtrend in the past few months. It has plunged from the year-to-date high of $126,300 to the current $108,600.
A closer look shows that it is about to form a death cross pattern as the spread between the 50-day and 200-day Weighted Moving Averages (EMA) has continued to narrow in the past few days. This is a sign that the coin is about to form a death cross, which often leads to more downside.
Bitcoin price has also formed a double-top pattern at $124,375 and a neckline at $108,357, its lowest level in June. This double-top pattern’s depth is about 12.2%. Measuring the same distance from the neckline goves it a target of $95,000, which coincides with the extreme oversold level of the Murrey Math Lines tool.
Bitcoin price is also in the process of forming a bearish pennant pattern, which is made up of a vertical line and a symmetrical triangle pattern.
BTC price has formed a rising wedge and divergence
The other main reason why the Bitcoin price may crash further is that numerous bearish patterns have formed on the weekly chart.
Bitcoin has formed a rising wedge pattern, which happens when there are two rising and converging trendlines. The two lines are about to converge, which may lead to a strong bearish breakout.
At the same time, top oscillators show that the coin has more downside as it has formed a bearish divergence pattern. The True Strength Index (TSI) has continued moving downwards as Bitcoin has jumped.
Other oscillators have also continued forming a bearish divergence pattern. This includes popular indicators like the Percentage Price Oscillator (PPO) and the Relative Strength Index (RSI).
These patterns point to more downside in the near term. The price target is established by first measuring the distance of the widest part and then the same one from the breakout point. This distance is about 48%, meaning that the coin may crash below $60,000 in the coming months.
Crypto Fear and Greed Index is falling
The other key catalyst for the Bitcoin price crash is that there is a sense of fear happening in the crypto industry. Data shows that the Crypto Fear and Greed Index has tumbled to the fear zone of 28. It has been in a major downtrend after peaking at the greed zone of 63 in May this year.
The CNN Money Fear and Greed Index has moved to the fear zone of 26. Further downside will have it move to the extreme fear zone of 25.
Most of the gauges, including the stock price breadth, put and call options, safe haven demand, and junk bond demand have all moved to the extreme fear zone.
This fear explains why investors have been reluctant to invest in Bitcoin ETFs. These funds had a net outflow of $1.28 billion last week. While they have gained $335 million so far this week, they have remained lower than their historical standards.
Bitcoin price may also continue falling as US inflation remains at an elevated level. Higher inflation may prevent the Fed from cutting rates aggressively.
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