Bitcoin Faces Potential Drop Below $20,000
Despite the recent decline in the US stock market and rising long-dated US yields, Bitcoin has managed to hold its ground. While it is currently trading at around $26,200, down 17% from its yearly high, it remains 5% above its monthly low. Investors are still interested in accumulating Bitcoin before next year’s halving and in anticipation of spot Bitcoin ETF approvals. However, there are three reasons why the BTC price may drop back to $20,000.
Macro Headwinds Are Building
Bitcoin has seen a 15% decline since the start of Q3 due to rising US bond yields and the strengthening US Dollar Index (DXY). The 10-year yield is at its highest level since 2007, while the 30-year yield is at its highest since 2011. The DXY is also at its highest level since December 2022. These trends suggest that the cryptocurrency market may not fully reflect recent changes in the macro landscape, potentially leading to a drop in Bitcoin’s price.
Bitcoin in a Bearish Descending Triangle
Bitcoin has formed a bearish descending triangle structure over the past few months. This pattern is considered bearish and a break below support in the $25,000s could trigger further selling pressure. The next significant support zone for Bitcoin is just below $20,000.
Double Rejection of the 200DMA Plus “Death Cross”
From a technical standpoint, there are concerns about Bitcoin’s major moving averages. Since breaking below its 200-day moving average (DMA) in August, Bitcoin has twice been rejected upon retests. This suggests a negative shift in the cryptocurrency’s medium-term outlook. Additionally, Bitcoin recently experienced a “death cross” when its 50DMA fell below its 200DMA, further indicating a bearish shift in market momentum.
Hot Take: Bitcoin’s Price Vulnerable to a Drop Below $20,000
Despite holding up relatively well compared to the US stock market, Bitcoin faces several challenges that could lead to a drop below $20,000. The macro headwinds, including rising bond yields and a strong US dollar, may have not fully impacted the cryptocurrency’s price yet. The bearish descending triangle structure and rejection of major moving averages also suggest potential downside risk. Investors should closely monitor these factors and consider the possibility of Bitcoin returning to lower price levels in the near future.
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