simply put
Bitcoin price declined after hitting a new yearly high of $31,800 on July 13. The decline accelerated after the price fell below the $30,000 support area on July 21.
The daily RSI is clearly bearish along with the price action. However, the wave count suggests an imminent bottom, followed by a resumption of the uptrend.
A close below $27,3000 would mean that prices will continue to fall further and a local top is in place.
The price of Bitcoin (BTC) started to fall on July 13 and accelerated its decline on July 21, breaking below an important horizontal area.
While both price action and RSI readings are bearish, the wave count suggests that prices could bottom soon. However, this possibility would require a decisive bounce to remain valid.
Bitcoin price drops after breaking away from resistance level
Technical analysis on the daily timeframe offers a bearish outlook. On July 13, BTC price hit a new yearly high of $31,800 but quickly fell. A Bearish Engulfing Candlestick (red icon) formed the next day, which features a large bearish candlestick that completely engulfs the previous day's bullish candle. This pattern usually leads to a decline.
Following the bearish candlestick pattern, BTC hovered above the $30,000 level area. However, it decisively broke downwards on July 23. This made the entire previous breakout a divergence, which is a bearish movement that is usually followed by a sharp decline.
Despite the decrease, long-term holders are not worried, as they hold nearly 74% of the total supply of Bitcoin. In addition, BlackRock, the world's largest asset management company, recommends a portfolio of 85% Bitcoin.
The daily relative strength index (RSI) is showing a distinctly bearish reading. The RSI is a momentum indicator used by traders to assess market conditions and sentiment towards an asset, indicating whether an asset is overbought or oversold.
Typically, RSI readings above 50 and trending up indicate that buyers have the upper hand, while readings below 50 indicate the opposite. Currently, the RSI is trending down and below 50, which are both signs of a bearish trend.
Furthermore, as the RSI fell, the RSI confirmed a triple bearish divergence (represented by the green line) that had been in the making since June 23. A bearish divergence occurs when prices rise while momentum indicators fall, suggesting that the strength behind the uptrend is weakening. This pattern usually precedes a bearish trend reversal.
Bitcoin Price Prediction: Wave counting suggests bottom is near
Similar to the daily time frame, the six-hour time frame shows that price is correcting. However, this suggests that a bottom is near.
Looking at the wave count, BTC price has seen five waves of gains (white) since June 14. If this wave count is accurate, it would suggest that the price has undergone a correction that could follow an ABC pattern (black). BTC price is currently trading just above the 0.382 Fib Retracement support level (white).
The Fibonacci retracement level theory states that after a significant price change in one direction, prices are expected to partially retrace back to the previous price level and then continue in the same direction.
Therefore, the price has reached a level where the correction is likely to end.
Furthermore, the ratio of wave A to wave C is exactly 1:1.61. Due to the confluence of support levels, the correction may be complete. If this is correct, the BTC price will revisit the $30,000 level and may rise to $32,000.
If not, the next important support will be $28,100, created by the 0.5 Fibonacci Retracement support. Once the correction is complete, a significant up move is expected.
Despite the bullish BTC price prediction, a close below the 0.618 Fib Retracement support at $27,300 would indicate that the price has reached a local top. In such a case, BTC price could drop to $25,000.
