Does Bitcoin’s Double Top Indicate More Declines In 2022?

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Bitcoin’s two highs in 2021 formed what is known in technical analysis as a “double top” pattern. Does this pattern indicate that the digital currency is headed for further downside in the near future?

Since bitcoin has no inherent value, fundamental analysis is of no use in predicting future price movements. However, technical analysis, which looks at charts of past movements in a stock’s price, looks for a series of similar patterns to predict the direction of the asset in the future.

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“Double tops with their formation can be rare events, often indicating that investors want to take eventual profits from a bullish trend,” says Investopedia, a financial markets interpreting site. “Double tops often lead to a bearish reversal in which traders can profit from selling the stock on a downtrend.”

The leading cryptocurrency has been steadily sinking since November 10, when it hit its all-time high of $68,991. On Wednesday, bitcoin closed at $46,445, a 33% dive in seven weeks.

When the value of an asset falls by 20% it is considered to be in a bear market. And bitcoin looks like a grizzly one.

For those who owned bitcoin in early 2021, when it was priced at $29,001, bitcoin has gained 60% over the year.

And what a year it has been for the bellwethers of the crypto market. By April, Coinbase – the country’s largest cryptocurrency exchange by volume – issued its initial public offering, more than double the price of bitcoin to $61,684.

Yet a month later, bitcoin entered a freefall precipitated by Tesla Motor CEO Elon Musk. Musk, one of the biggest proponents of bitcoin, previously said that he would accept bitcoin as payment for a Tesla car. On 13 May, he reversed the situation. He added that excessive use of fossil fuels needed to mine bitcoins is bad for the environment. But, he added, Tesla would start accepting bitcoin again if people were able to use a more sustainable energy source in its production.

Within two weeks, China, home to the largest bitcoin mining community, began cracking down on its miners and crypto traders. Soon after, China threatened to ban bitcoin and other cryptocurrencies. Other countries also threatened to start regulating crypto. Crypto Market Tanks.

By July 20, bitcoin had given up all its gains for the year, reaching a low of $29,361.

Then in August, investors began buying the digital currency in the hopes of San Salvador making bitcoin its official national currency alongside the US dollar. The September 7 launch gave bitcoin bulls recognition that the coin could serve as a global currency. The day before the launch, the price of the coin peaked at $52,854, an increase of 80% from its July lows.

Then in late September, China banned digital tokens and made all transactions in cryptocurrencies illegal. Bitcoin fell to $40,693.

But it began to climb again in October as big banks jumped on the crypto bandwagon and Securities and Exchange Commission (SEC) chairman Gary Gensler said he would not ban cryptocurrencies, the cloud hanging over the market.

Then on November 10, bitcoin hit its all-time high. On the same day, Coinbase, the crypto exchange that fueled bitcoin’s rally at the start of the year, released earnings. They missed Wall Street’s expectations. Stocks and bitcoin both took a dive. Since then, the coin’s price has fallen by 33%.

Last week, the coin rebounded near the $50,000 level, trying to break the $52,000 technical support level. It failed and started sliding again on Monday.

Another bearish indicator comes from sentiment data, which suggests that investors holding between 1,000 and 10,000 bitcoins are selling.

Looking at the chart of bitcoin’s price movement, technical analysis says that $44,000 is the next support level. But if the price does fall through it, there is no resistance level to stop it before it drops to $30,000, where it started the year.


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