Bitcoin (BTC) bulls were disappointed when they saw that the recent crash was more than a healthy pullback. While the altcoin market is getting fleeced at the moment, BTC/USD is still holding its ground significantly better. If we take a look at the daily chart, we can see that the price declined to the 21 Day EMA and it bounced off strongly soon as it tested it. If the price manages to close above the 21 Day EMA, the bulls might have another opportunity to save the price and take it towards another high short term. It is pertinent to note though that the rising wedge we saw on the chart since the beginning of the month is now broken and the price could crash hard from here.
While the bears have nothing to be excited about as long as the price remains above the 21 Day EMA, the bulls have nothing to be excited above even if we see another short-lived rally to the upside. Going long on Bitcoin (BTC) here is no different than buying around the top during the parabolic bull run of 2017. The small 10%-20% move that we could expect if the price holds the 21 Day EMA is not worth it compared to what will follow when the price declines below the 21 Day EMA. Now, one might argue that there is nothing to worry about as long as the price remains above that level but if we take a look at the Wookalich Ratio indicator, we can see that it has been constantly flashing a sell signal and if the price crashes below the 21 Day EMA, it will be a little too late to get out.
Bitcoin Historical Volatility Index (BVOL) has been a good indicator of what we can expect the price to do. If we take a look at the weekly chart, we can see that the last time volatility spiked up like this, we saw the price decline sharply below the $6,000 support and it ended up making new yearly lows close to $3,000. Certainly, a rise in volatility does not equate to a fall in price but we are in a bear market and the price is on the verge of another downtrend because it has topped out. In light of the overbought technicals, we expect that a spike in volatility will lead to a sharp decline in the price.
The index has formed an ascending triangle that could break to the upside any time now. This breakout will likely coincide with a sharp decline in BTC/USD that could drag the price well below the 21 Day EMA. We expect it to find temporary support around the 21 Week EMA before it can stage a relief rally. When the price declines and closes below the 21 Day EMA, we will have confirmation that the show is over. Market makers would still try to instill hope in the market and lead retail traders into thinking this is just a healthy pullback but we will see a slow bleed to sub $3,000 till the price finds its true bottom.