Bitcoin just completed an inverse head and shoulders pattern in the daily chart. The pattern, upon completion, signals a potential price trend reversal. The pattern is made up of a top (shoulders), followed by a higher top (head) and then a lower top (shoulders). In the case of BTC, this could mean BTC falling below $25,000.
Veteran trader Peter Brandt saw signs of a head and shoulders pattern appear on Bitcoin’s daily chart on May 11.
BTC has dipped below previous support at around $27,000 and is heading towards new support at around $25,000. The $25,000 level was previously tested between March, February and August 2022. There is also a chance that BTC drops below $25,000 and fluctuates somewhere between $25,000 – $22,000.
The current drop may be due to rumors about the US Government selling BTC holdings, rumors like these can cause investor sentiment to panic.
Will Bitcoin Recover as Price Drops to $22,000 – $25,000?
Ideally, the $22,000-$25,000 area is a healthy level for Bitcoin to bounce back, according to IntoTheBlock, this area has a lot of liquidity. Many investors bought BTC at that price. According to some analysts, “the range of $22,000 to $25,000 could involve institutional investors.”
Moreover, inflation in the US was at 4.9%, lower than expected. This creates an opportunity for the Fed to lower or even pause interest rates. A more liberal monetary policy is likely to attract investment in risky assets, such as Bitcoin. However, it is possible that the “big players” are waiting for BTC to drop to a lower price to enter.
Hence, there is a chance that BTC will recover, however, only after it drops further to the sub-$25,000 region from the current price, there is also a possibility that if the bears drag the price below $22,000, it could lead to even stronger liquidation consequences.